Identify Which of the Following Statements Is True

question 48

Multiple Choice

Identify which of the following statements is true.

• A)When adjusting a partner's basis in a partnership interest, the negative basis adjustments are made prior to the positive basis adjustments.
• B)Martin and Carlos formed an equal partnership to which Martin contributed $10,000 cash and Carlos contributed a building worth $10,000 with a basis of $2,000. In the first year of operation, the partnership suffered a $10,000 ordinary loss. Martin and Carlos can each deduct a $5,000 loss on their personal tax returns.
• C)Any distributive share of a loss that cannot be deducted by a partner because of the Sec. 704(d)basis loss limitation is permanently lost.
• D)All of the above are false.

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Definitions:

Direct Method

An accounting approach used to allocate service departments' costs directly to the producing departments without considering any services rendered between service departments.

Service Department

A division within a business that provides support services to other departments, such as maintenance, cleaning, or IT support.

Information Technology

The use of computers, software, and networks for the storage, retrieval, transmission, and manipulation of data.

Operating Departments

The divisions or units within an organization directly involved in its core business operations, where the main activities for generating revenue take place.