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.

---

Definitions:

Present Value

The present value of a future amount of money or series of cash flows, discounted at a certain rate of return.

Cash Flows

The total amount of money being transferred into and out of a business, particularly in the context of operating, investing, and financing activities.

Discounted

A reduced price from the standard cost of goods or services, often used as a sales promotion.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost.