Misty and John Formed the MJ Partnership

question 183

Multiple Choice

Misty and John formed the MJ Partnership. Misty contributed $50,000 of cash in exchange for her 50% interest in the partnership capital and profits. During the first year of partnership operations, the following events occurred: the partnership had a net taxable income of $20,000; Misty received a distribution of $12,000 cash from the partnership; and Misty had a 50% share in the partnership's $60,000 of recourse liabilities on the last day of the partnership year. Misty's adjusted basis for her partnership interest at year end is:

• A) $48,000.
• B) $60,000.
• C) $78,000.
• D) $88,000.
• E) $90,000.

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Definitions:

Antitrust Laws

Legislation that prohibits firms from combining in a way that would stifle competition within that industry.

Large Businesses

Entities that operate on a large scale, typically characterized by significant employee numbers, vast operational reach, and substantial revenue streams.

Minimum Wage

The lowest legal hourly pay rate that employers can pay to workers, established by government law or regulation.

Executive Workers

Individuals who hold high-ranking positions within an organization, overseeing its management and making major decisions concerning its operation.