In 2018, Bluebird Corporation Had Net Income from Operations of $100,000

question 3

Multiple Choice

In 2018, Bluebird Corporation had net income from operations of $100,000. Further, Bluebird recognized a long-term capital gain of $30,000, and a short-term capital loss of $45,000. Which of the following statements is correct?

• A) Bluebird Corporation will have taxable income in 2018 of $100,000 and will have a net capital loss of $15,000 that can be carried back 3 years and forward 5 years.
• B) Bluebird Corporation may use the capital loss to offset the capital gain and must carry the net capital loss of $15,000 forward five years as a short-term capital loss.
• C) Bluebird Corporation may deduct $33,000 of the capital loss in 2018 and may carry forward the remainder of the capital loss indefinitely to offset capital gains.
• D) Bluebird Corporation will have taxable income in 2018 of $85,000.
• E) None of the above.

Understand fundamental principles regarding partnership formation, including the necessity and significance of a written agreement among partners.

Recognize the rights and obligations of partners towards the partnership and each other in management, profit sharing, and loss absorption.

Identify the rules concerning the property rights of the partnership and implications for personal and partnership assets.

Comprehend the legal consequences and liabilities of partners for actions within the scope of partnership business, including wrongful acts and debts.

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Definitions:

Installment Note

A debt or loan that is repaid over time with a set number of scheduled payments.

Fiscal Year

A 12-month period used for accounting purposes and preparing financial statements, which may not align with the calendar year.

Principal Repayment

The process of paying back the original amount borrowed from a lender, excluding interest payments.

Remote Contingent Liability

A potential liability that is considered unlikely to occur and thus is not recorded in financial statements but may be disclosed in the notes.