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:

Current Ratio

It's a measure of a corporation's capability to meet its immediate financial obligations using its current assets.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity of the company.

Financial Ratios

Quantitative measures derived from a company's financial statements used to evaluate its financial performance and health.

Financial Stability

The condition of having a strong financial foundation, characterized by the ability to withstand economic fluctuations and meet obligations without undue stress.