Which of the Following Statements Is Correct

question 62

Multiple Choice

Which of the following statements is correct?

• A)If a new partner invests cash in an existing partnership and a bonus is given to a new partner, the old partners' capital accounts increase.
• B)When a new partner is admitted to an existing partnership upon an investment of cash, the new partner's capital account may appropriately be debited for an amount other than the amount of cash invested.
• C)The partnership agreement should include steps to follow if a partner withdraws from the partnership.
• D)When a new partner is admitted to an existing partnership upon an investment of cash, the new partner's capital account will always equal the amount of cash the new partner invested.

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Definitions:

AMT Adjustments

Modifications required under the Alternative Minimum Tax rules to calculate certain items of income and deductions differently than for regular tax purposes.

Tax Preferences

Certain types of income or deductions that receive preferential tax treatment, affecting the calculation of alternative minimum tax (AMT).

Passive Activities

Economic engagements, such as rental activities or businesses in which the taxpayer does not actively participate, often with specific tax rules.

Passive Losses

Losses incurred from business activities in which the taxpayer does not materially participate, often from real estate.