Which of the Following Statements Regarding a Partner's Basis Adjustments

question 55

Multiple Choice

Which of the following statements regarding a partner's basis adjustments is True?

• A) A partner's basis may never be reduced below zero.
• B) A partner must adjust his basis for ordinary income (loss) but not for separately stated items.
• C) A partnership fine or penalty paid by the partnership does not affect a partner's basis.
• D) Relief of partnership debt increases a partner's tax basis.

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Definitions:

GAAP

An aggregation of universally recognized rules and standards in accounting for presenting financial information.

Non-Interest-Bearing Note

A type of promissory note that does not accrue interest over its life, with the borrower repaying only the principal amount borrowed.

Net Carrying Value

The current book value of an asset or company after subtracting total liabilities from total assets.