Meg and Abby Are Equal Partners in the AM Partnership

question 32

Multiple Choice

Meg and Abby are equal partners in the AM Partnership, which earns $40,000 ordinary income, $6,000 long-term capital gain (LTCG) , and $2,000 Sec. 1231 loss during the current year. What is the amount and character of income that must be reported on Abby's tax return for this year's partnership operations?

• A)$20,000 ordinary income, $3,000 LTCG, $1,000 Sec. 1231 loss
• B)$19,000 ordinary income, $3,000 LTCG
• C)$23,000 ordinary income, $1,000 Sec. 1231 loss
• D)$22,000 ordinary income

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Definitions:

Debt Securities

Financial instruments representing money that is borrowed and must be repaid, with terms that define the amount borrowed, interest rate, and maturity date.

Year 3

Third year in a series, sequence, or timeline, often used in financial and analytical contexts to denote the third year of operations, performance, or analysis.

Comparative Balance Sheets

Financial statements that show a company's financial position at different points in time, facilitating analysis of trends and changes.

Year 1

Year 1 often refers to the first fiscal or calendar year of operation for a business or the initial year in a time series analysis.