The Three Crosby Children Intend to Form a Business

question 65

Multiple Choice

The three Crosby children intend to form a business. The business will borrow $900,000 from a local bank. Which of the following statements is true?

• A) Regardless of whether the business is a partnership or an S corporation, the owners will include the bank debt in the tax basis of their ownership interests.
• B) From a liability standpoint, the owners should be indifferent as to whether they are a general partnership or an S corporation.
• C) If the business is an S corporation, the owners can allocate income and losses in any reasonable manner.
• D) If the business is a partnership the owners can allocate income and losses in any reasonable manner.

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