David Contributes Investment Land with a Basis of $24,000 and an FMV

question 115

Multiple Choice

David contributes investment land with a basis of $24,000 and an FMV of $40,000 to a partnership for a 10% interest in partnership capital, profits, and losses. The land is subject to a $30,000 recourse liability, which is assumed by the partnership. The partnership has other recourse liabilities of $18,000. Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. David must recognize a

• A)$3,000 capital gain.
• B)$3,000 capital loss.
• C)$1,200 capital gain.
• D)$1,200 capital loss.

Analyze the process of allocating support department costs using direct, reciprocal, and sequential methods.

Distinguish between different allocation bases and their appropriateness for specific products or services.

Evaluate the performance of departments using allocated costs.

Classify departments as either support or production departments.

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Definitions:

Employee Benefits

Nonmonetary forms of compensation such as health benefits and retirement plans.

Monetary Forms

Various representations of money, including cash, checks, electronic transfers, and other means of financial transactions.

Profit-Sharing Plans

A company program where employees receive a portion of the firm's profits in addition to their regular income.

Cost Savings

The reduction in expenses achieved through efficiency improvements, better resource management, or other means.