Meritt Is a Partner in the McPherson Partnership

question 29

Multiple Choice

Meritt is a partner in the McPherson Partnership. At the close of the current year, Meritt's basis in the partnership is $25,000.
I.If the partnership distributes cash of $7,500 to Meritt, she must report the cash as income.
II.If the partnership distributes property with a basis of $12,000 and a fair market value of $15,000, Meritt must report $3,000 as income.
​

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

---

Definitions:

Chloromethane

A colorless, flammable gas with a slight sweet odor, used in the production of silicones and butyl rubber.

Ethyne

A hydrocarbon compound with the formula C2H2, also known as acetylene, used as a fuel and a chemical building block.

Double Bonds

Chemical bonds between two chemical elements involving four bonding electrons instead of the usual two.

Acetylene

A colorless, highly flammable gas, C2H2, used as a fuel and a building block for synthetic materials; it’s the simplest alkyne.