Shannon and Art Are Each 10% Partners in the Such-A-Deal

question 16

Essay

Shannon and Art are each 10% partners in the Such-A-Deal Partnership. Due to several years of partnership operating losses, both Shannon and Art have a zero basis in their partnership interests. For the current year, the partnership is incurring a loss of $100,000. When he hears the news about the loss, Shannon tells Art he wishes the partnership management would go to the local bank and borrow "a couple of hundred thousand dollars." Art does not understand why Shannon would want the partnership to go into debt. The concept of debt makes Art very nervous; Art personally does not borrow money. In fact, Art does not even use credit cards. Explain to Art why Shannon wants the partnership to incur more debt. Also, comment on why Art's general concerns about debt have merit, specifically focusing on the partnership debt.

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Definitions:

Discrimination Learning

The ability to differentiate between various stimuli or situations based on learned characteristics.

Generalization Gradient

The degree to which learned behavior is conducted in response to variations of the original conditioned stimulus, showing the relationship between similarity to the original stimulus and behavioral response.

Discrimination Training

A learning process in which an organism learns to respond differently to various stimuli that are not identical.

Inhibition Generalizes

A psychological phenomenon where the suppression of a response to a particular stimulus also suppresses responses to similar stimuli.