If a Partner Contributes Services on the Formation of a Partnership,how

question 55

Multiple Choice

If a partner contributes services on the formation of a partnership,how much income does the service partner recognize,if any?

• A)$0,unless the partner receives a cash distribution.
• B)$0.
• C)An amount equal to the FMV of the services rendered.
• D)$0 if the partner's basis was $0 when the services were performed.

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Definitions:

Expenditure Basis

An accounting method that recognizes expenses when they are paid rather than when they are incurred.

Expense Basis

An accounting method where expenses are recognized and recorded when they are incurred, regardless of when the cash payment is made.

Encumbrance Accounting

An accounting method used mainly by governments that tracks commitments in their budgets, earmarking funds for specific future expenditures.

Purchase Order

A commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services.