Identify Which of the Following Statements Is True

question 48

Multiple Choice

Identify which of the following statements is true.

• A)When adjusting a partner's basis in a partnership interest, the negative basis adjustments are made prior to the positive basis adjustments.
• B)Martin and Carlos formed an equal partnership to which Martin contributed $10,000 cash and Carlos contributed a building worth $10,000 with a basis of $2,000. In the first year of operation, the partnership suffered a $10,000 ordinary loss. Martin and Carlos can each deduct a $5,000 loss on their personal tax returns.
• C)Any distributive share of a loss that cannot be deducted by a partner because of the Sec. 704(d)basis loss limitation is permanently lost.
• D)All of the above are false.

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Definitions:

Hydraulic Car Smasher

A machine designed to compress and destroy vehicles or large metal objects using hydraulic pressure.

Marginal Cost

The cost incurred by producing one additional unit of a product.

Dispose of Cars

The method of disposing of unwanted or obsolete vehicles by means such as recycling, selling, or scrapping.

Variable Costs

Costs that change in proportion to the level of production or business activity.