ABC CoAnd XYZ Co

question 3

Multiple Choice

ABC Co.and XYZ Co.have entered into a 50/50 partnership for business purposes.Both companies are CCPCs and they share the profits and losses of the business equally.During the year,the partnership earned $200,000 of active business income,and ABC Co.earned $450,000 in business income from operations other than the partnership.All of the companies have a December 31^st year-end.How much of ABC Co.'s share of the partnership profits will be eligible for the small business deduction.

• A) $200,000
• B) $100,000
• C) $50,000
• D) $0

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Definitions:

Fair Value

Fair value is the estimated price at which an asset or liability could be exchanged between knowledgeable, willing parties in an arm's length transaction.

Contingent Consideration

Future payment obligations in a business combination or other arrangements that depend on specific outcomes or achievements.

Goodwill

The intangible asset that arises when a company acquires another company for a price higher than the fair value of its net identifiable assets.

Share Issue Costs

The expenses associated with issuing new shares of stock, including legal, accounting, and underwriting fees.