TEC Partners Was Formed During the Current Tax Year

question 89

Multiple Choice

TEC Partners was formed during the current tax year. It incurred $10,000 of organizational expenses, $80,000 of startup expenses, and $5,000 of transfer taxes to retitle property contributed by a partner. The property had been held as MACRS property for ten years by the contributing partner, and had an adjusted basis to the partner of $300,000 and fair market value of $400,000. Which of the following statements is correct regarding these items?

• A) TEC treats the contributed property as a new MACRS asset placed in service on the date the property title is transferred.
• B) TEC must amortize the $10,000 of organizational expenses over 180 months.
• C) TEC's startup expenses are amortized over 60 months.
• D) TEC must capitalize the transfer tax and treat it as a new asset placed in service on the date the property is contributed.
• E) None of the above statements are true.

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Definitions:

Null Hypothesis

A statement used in statistics that suggests there is no effect or no difference, and any observed variance is due to chance.

Alpha

In statistics, alpha represents the significance level, the probability of rejecting the null hypothesis when it is actually true, often set at 0.05.

Alternative Hypothesis

The hypothesis that is tested against the null hypothesis in statistical hypothesis testing, representing a statement that indicates some effect or difference.

Critical Value

A threshold value in hypothesis testing that defines the boundary for rejecting the null hypothesis; it is determined by the chosen significance level.