Olivia Owns 40% of Addison Company, a Partnership

question 55

Multiple Choice

Olivia owns 40% of Addison Company, a partnership. Olivia's adjusted basis in the partnership is $22,000 at the beginning of the year. During the current year, Olivia receives a $10,000 cash distribution from the partnership. Addison Company reports a $100,000 operating loss for the current year. If Olivia is a material participant in Addison Company, how much of the partnership loss can she deduct on her income tax return?

• A)$-0-
• B)$10,000
• C)$12,000
• D)$40,000

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Definitions:

Working Capital Ratio

A financial metric that measures a company's efficiency and its short-term financial health by comparing current assets to current liabilities.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenues, expenses, and net income.

Working Capital Ratio

a financial metric that measures a company's ability to pay off its current liabilities with its current assets, an indicator of financial health.