Which of the Following Statements Regarding the Rationale for Adjusting

question 11

Multiple Choice

Which of the following statements regarding the rationale for adjusting a partner's basis is false?

• A)To prevent partners from being double taxed when they sell their partnership interests.
• B)To ensure that partnership tax-exempt income is not ultimately taxed.
• C)To prevent partners from being double taxed when they receive cash distributions.
• D)To ensure that partnership nondeductible expenses are never deductible.
• E)None of these rationales are false.

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Definitions:

Premarital Contract

An agreement between individuals planning to marry that outlines the management of their assets and financial matters upon marriage.

Informal Contract

A contract that requires no formalities. Also called simple contract.

Formal Contract

A contract that must have a special form or must be created in a specific manner.

Simple Contract

A contract that is not a formal contract. Also called an informal contract.