Regarding a partnership, which of the following statements is/are always correct?
I.If a partnership is an active trade or business and it has a $65,000 loss from its business operations that is passed-through as an active loss to its partners, each active partner can deduct his full share of loss for the year to the extent they have basis that is at-risk.
II.Salaries and bonuses paid to partner-employees (other than guaranteed payments) are a deductible business expense.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

Regarding a partnership, which of the following statements is/are always correct?
I.If a partnership is an active trade or business and it has a $65,000 loss from its business operations that is passed-through as an active loss to its partners, each active partner can deduct his full share of loss for the year to the extent they have basis that is at-risk.
II.Salaries and bonuses paid to partner-employees (other than guaranteed payments) are a deductible business expense.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

Statement I is correct because partners in a partnership can deduct their share of the partnership's losses to the extent of their basis in the partnership, provided the losses are from an active trade or business and they have at-risk basis. Statement II is incorrect because salaries and bonuses paid to partners are not deductible as business expenses by the partnership; instead, they may be treated as guaranteed payments, which are deductible.

Regarding a Partnership, Which of the Following Statements Is/are Always