TEC Partners Was Formed During the Current Tax Year

question 170

Multiple Choice

TEC Partners was formed during the current tax year. It incurred $10,000 of organizational expenses, $80,000 of startup expenses, and $5,000 of transfer taxes to retitle property contributed by a partner. The property had been held as MACRS property for ten years by the contributing partner, and had an adjusted basis to the partner of $300,000 and fair market value of $400,000. Which of the following statements is correct regarding these items?

• A) TEC treats the contributed property as a new MACRS asset placed in service on the date the property title is transferred.
• B) TEC must amortize the $10,000 of organizational expenses over 180 months.
• C) TEC's deducts the first $5,000 of startup expenses and amortizes the remainder over 180 months.
• D) TEC must capitalize the transfer tax and treat it as a new asset placed in service on the date the property is contributed.
• E) None of the above statements are true.

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered, which should not affect future business decisions.

Alternatives

Different options or strategies available for achieving a goal or solving a problem, often considered during decision-making processes.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or business activity.

Monthly Rent

A regular payment made for the use of property or land on a monthly basis.