Cramer Corporation and Mr

question 28

Multiple Choice

Cramer Corporation and Mr. Chips formed a general partnership. Cramer contributed $500,000 cash, and Mr. Chips contributed a building with a $500,000 FMV and $300,000 tax basis. The partnership immediately borrowed $700,000 of recourse debt. What is Mr. Chips' tax basis in its partnership interest?

• A) $500,000
• B) $1,200,000
• C) $850,000
• D) $650,000

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Definitions:

Rhode Island

The smallest U.S. state by area, located in the New England region.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite of normal goods.

Income Increases

Situations where individuals or households experience a rise in earnings, affecting their purchasing power and consumption choices.

Demand Curve

A graphical representation that shows the relationship between the quantity of a good or service consumers are willing and able to purchase and its price.