At the Beginning of the Tax Year, Zach's Basis for His

question 4

Multiple Choice

At the beginning of the tax year, Zach's basis for his partnership interest and his amount at risk in the partnership was $30,000. His share of partnership items for the year consisted of tax-exempt interest income of $2,000 and an ordinary loss of $44,000. He also received a distribution of $20,000 cash from the partnership during the year. He is an active general partner and has no passive income or business losses from other sources. For the tax year, Zach will report:

• A) A nontaxable distribution of $20,000, an ordinary loss of $10,000, and a suspended loss carryforward of $34,000.
• B) An ordinary loss of $32,000, a suspended loss carryforward of $12,000, and a taxable distribution of $20,000.
• C) A nontaxable distribution of $20,000, an ordinary loss of $12,000, and a suspended loss carryforward of $32,000.
• D) An ordinary loss of $44,000 and a nontaxable distribution of $20,000.

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Definitions:

Sound Of A Bell

An auditory signal typically resulting from the physical ringing of a bell, which can produce a clear, resonant tone.

Conditioned Response

A learned response to a previously neutral stimulus that has been repeatedly presented alongside an unconditioned stimulus that elicits a natural response.

Extinction

In behavioral psychology, the diminishing of a conditioned response when the reinforcement or association is removed.

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with the unconditioned stimulus, eventually comes to trigger a conditioned response.