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Jose, Mahlon, and Eric Are Partners in New Communications Partnership

question 73

Multiple Choice

Jose, Mahlon, and Eric are partners in New Communications Partnership. Jose owns a 50% interest, Mahlon owns a 35% interest, and Eric owns a 15% interest. During the current year (the first year of operation for the enterprise) , the business has a loss. Although the partnership is established as a general partnership, Jose functions as the manager and performs all of the day-to-day duties of a chief operating officer. Mahlon and Eric are merely investors who receive monthly reports about the business. At the close of the current tax year, each partner will receive a share of the partnership loss. Which of the partners will be able to deduct his (their) share of the partnership loss?
I.Jose
II.Mahlon
III.Eric


Definitions:

Transfer Price

The cost at which products and services are exchanged between departments within the same organization.

Tax Rate

The percentage at which an individual or corporation's income is taxed by the government.

Profitable Subassembly

A component or assembly within a product that generates profit by being produced and sold as part of the final product.

Absorption Costs

The total of all direct and indirect manufacturing costs assigned to a product.

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