Ali, a Contractor, Builds an Office Building for a Construction

question 82

Multiple Choice

Ali, a contractor, builds an office building for a construction partnership in exchange for a capital and profits interest in the partnership worth $500,000. Which of the following statements is correct?

• A)Ali recognizes $500,000 of ordinary income and the partnership can deduct $500,000 in the current year.
• B)Ali recognizes no income and the partnership can deduct nothing in the current year.
• C)Ali recognizes $500,000 ordinary income and the partnership deducts the $500,000 over the building's MACRS recovery period as a depreciation expense.
• D)Ali recognizes ordinary income in the current year in an amount equal to the depreciation deduction the partnership claims this year for the $500,000 capitalized amount.

---

Definitions:

Negative News Message

Communication that conveys unpleasant or adverse information in a tactful and considerate manner.

Bad News

Unfavorable or distressing information that needs to be communicated.

Indirect Approach

A method of addressing a problem or communicating that is not straightforward, often involving subtlety or circumvention.

Well-Written Reasons

Compelling or persuasively articulated arguments or explanations designed to justify or explain a decision or action.