Roger,Ellen,Drew and Cindy Are Equal Partners in a Local Pub

question 104

Multiple Choice

Roger,Ellen,Drew and Cindy are equal partners in a local pub.The pub reports the following items for the current year: Each partner receives a Schedule K-1 with one-fourth of the preceding items reported to him/her.How must each individual report these results on his/her Form 1040?

• A)$257,667 on Schedule E; $40,000 on Schedule A.
• B)$192,500 on Schedule E; $40,000 on Schedule A.
• C)$770,000 on Schedule E; $160,000 on Schedule A.
• D)$385,000 on Schedule E; $40,000 on Schedule A.

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Definitions:

Macaulay Duration

A measure of the weighted average time until a fixed income asset's cash flows are received, used to assess interest rate risk.

Yield

The earnings generated and realized on an investment over a particular period, expressed as a percentage of the investment’s cost, its current market value, or its face value.

Modified Duration

A measure of the sensitivity of a bond's price to changes in interest rates, adjusting for the bond's yield to maturity.

Modified Duration

A measure that estimates the price sensitivity of a bond or bond portfolio to interest rate changes, adjusting for the changing yield to maturity.