At the Formation of the BD Partnership, Betty Contributes Land

question 114

Multiple Choice

At the formation of the BD Partnership, Betty contributes land with a basis of $10,000 and an FMV of $30,000 and Dick contributes cash of $30,000. Betty and Dick share profits and losses equally. When the land is sold two years later for $50,000, Betty must recognize a gain of

• A)$10,000.
• B)$20,000.
• C)$30,000.
• D)$40,000.

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Definitions:

Net Income Before Taxes

The total revenue minus the total expenses, excluding tax expenses.

Debt Management Ratio

Financial ratios that evaluate a company's ability to manage its long-term debts, including measurements like debt to equity and interest coverage ratio.

Debt to Total Assets

A financial ratio indicating the percentage of a company's assets financed by creditors as opposed to equity.

Times Interest Earned

A financial ratio that measures a company’s ability to meet its interest payments based on its earnings before interest and taxes.