Identify Which of the Following Statements Is True

question 57

Multiple Choice

Identify which of the following statements is true.

• A)A contribution of services for a partnership interest is a tax-free transaction.
• B)For federal income tax purposes, formation of a partnership is governed by Sec. 721.
• C)When a partnership assumes a liability on property contributed by a partner, the only effect on the contributing partner's basis in his or her partnership interest is that his or her basis will be increased by the amount of the liability assumed by the other partners.
• D)All of the above are false.

---

Definitions:

Bankrupt

A person who has made an assignment in bankruptcy or been forced into bankruptcy through a court order obtained by a creditor, and who has not been discharged from bankruptcy.

Discharged

The release or termination of an obligation, such as debt or duty, under certain conditions.

Security Agreement

A legal contract that grants a lender a security interest in an asset or property offered as collateral for a loan.

Assigned

Transferred or allocated to a party or for a specific purpose.