Ed's Adjusted Basis in His Partnership Interest at the Beginning

question 91

Multiple Choice

Ed's adjusted basis in his partnership interest at the beginning of the tax year is $35,000. The partnership has operating income of $20,000 for the current year. Ed is a 50% partner, and he receives a current distribution of $40,000 cash this year. What is (are) the tax effect of these events?
I.Ed recognizes $10,000 of ordinary income from the partnership for the year.
II.Ed recognizes $40,000 of ordinary income due to the distribution.
III.Ed's adjusted basis in his partnership interest at the close of the tax year is zero.
​

• A)Statements II and III are correct.
• B)Only statement I is correct.
• C)Statements I, II, and III are correct.
• D)Only statement III is correct.
• E)Statements I and III are correct.

---

Definitions:

HR Forecasting Predictions

Estimations made about future human resources needs based on current data, trends, and analysis to guide hiring and workforce development practices.

HR Supply

The source of human capital to meet demand requirements, obtained either internally (current members of the organization's workforce) or from external agencies.

Human Resources

The department of a business or organization that deals with the hiring, administration, and training of personnel.

Firm Strategy

Firm strategy is a company’s plan to achieve its objectives and gain competitive advantage, guiding decisions on products, services, markets, and resources.