Alice Contributes Equipment (Fair Market Value of $50,000; Adjusted Basis

question 11

Multiple Choice

Alice contributes equipment (fair market value of $50,000; adjusted basis of $15,000) , subject to a $10,000 liability, to form Orange Partnership, a general partnership. Mary contributes $40,000 cash. Alice and Mary share equally in partnership profits and losses. What is Alice's and Mary's basis for their partnership interests?

• A) $10,000 to Alice, $45,000 to Mary.
• B) $25,000 to Alice, $25,000 to Mary.
• C) $15,000 to Alice, $40,000 to Mary.
• D) $5,000 to Alice, $40,000 to Mary.
• E) $20,000 to Alice, $45,000 to Mary.

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Definitions:

Benefits Received

A principle in public finance that taxes should be levied according to the benefits received by the taxpayer from government services.

Price Elasticity

A measure of how responsive the quantity demanded of a good is to a change in its price.

Demand Curve

The number of units of a product that people would be willing to purchase at different price levels.

Supply Curve

A graphical representation of the relationship between the price of a good or service and the quantity supplied for a given period.