Identify Which of the Following Statements Is True

question 101

Multiple Choice

Identify which of the following statements is true.

• A) The contribution of Sec. 1245 property to a partnership triggers recognition of ordinary income by the contributor at the time of the transfer.
• B) When a partnership interest is given to a partner in exchange for services, the partnership can deduct or capitalize the FMV of the services, depending on the nature of the services.
• C) A partner may not recognize ordinary income when receiving a capital and profits interest in a partnership in exchange for services.
• D) All of the above are false.

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Definitions:

Total Variable Cost

The sum of expenses that vary with the level of output, including costs like materials and labor, which increase as production increases.

Average

A statistical measure central to a data set or distribution, typically the sum of all values divided by the number of values.

Variable Cost

Costs that change in proportion to the level of activity or production volume.

Payroll Taxes

Taxes imposed on employers and employees, calculated as a percentage of the wages that employers pay their staff.