​Which One of the Following Allocations Is Most Likely to Meet

question 88

Multiple Choice

​Which one of the following allocations is most likely to meet the "substantial" test in the "substantial economic effect" rules? (Assume all the "economic effect" tests are met.)

• A)​The ROY LLC specially allocates $20,000 of income each year to partner Red with no offsetting loss allocations in other years.
• B)​The YGB LLC specially allocates $30,000 of ordinary income this year to partner Green with an offsetting allocation of loss in that same amount next year.
• C)​The BPV LLC specially allocates $10,000 of capital gains to Violet and $10,000 of interest income to Purple because Purple is in a lower tax bracket.
• D)​The PIR LLC specially allocates $60,000 of income to Indigo with no offsetting allocations. Indigo has expiring net operating losses.

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Definitions:

Homoeothermic

Refers to organisms that maintain a constant internal body temperature regardless of external environmental conditions.

DDT

Dichloro-Diphenyl-Trichloroethane, a synthetic organic compound once widely used as an insecticide, now known to be an environmental pollutant.

Herbivores

Organisms that primarily eat plants, including leaves, flowers, stems, and sometimes roots, for their nutrition.

Autotrophs

Organisms capable of producing their own food from inorganic substances using light or chemical energy, without consuming organic substances from other organisms.