Match Each of the Following Statements with the Terms Below

question 70

Multiple Choice

Match each of the following statements with the terms below that provide the best definition.
-Economic effect test

• A)Adjusted basis of each partnership asset.
• B)Operating expenses incurred after entity is formed but before it begins doing business.
• C)Each partner's basis in the partnership.
• D)Reconciles book income to taxable income.
• E)Tax accounting election made by partnership.
• F)Tax accounting calculation made by partner.
• G)Tax accounting election made by partner.
• H)Does not include liabilities.
• I)Designed to prevent excessive deferral of taxation of partnership income.
• J)Amount that may be received by partner for performance of services for the partnership.
• K)Theory under which a partnership's recourse debt is shared among the partners.
• L)Will eventually be allocated to partner making tax-free property contribution to partnership.
• M)Partner's share of partnership items.
• N)Must generally be satisfied by any allocation to the partners.
• O)Justification for a tax year other than the required taxable year.
• P)No correct match is provided.

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Definitions:

Laffer Curve

A representation of the relationship between rates of taxation and the resulting levels of government revenue that illustrates there can be an optimum tax rate that maximizes revenue.

Tax Revenues

The income that is collected by governments through taxation.

Progressive Tax

A tax in which the average tax rate rises with income. People with higher incomes will pay a higher percentage of their income in taxes.

Proportional Tax

A tax in which the average tax rate is the same at all income levels. Everyone pays the same percentage of income in taxes.