Question

Which of the following statements regarding a partner's basis adjustments is false?
A. A partner's basis may never be reduced below zero
B. Relief of partnership debt decreases a partner's tax basis
C. Partnership fines and penalties do not affect a partner's basis.
D. A partner must adjust his basis for ordinary income (loss) and for separately stated items

Answer 1

Answer: Partnership fines and penalties do not affect a partner's basis

Explanation:

Partnership is a formal arrangement that involves two or more individuals coming together in order to manage a business.

The option that Partnership fines and penalties do not affect a partner's basis is false. It should be noted that fines and penalties affect the basis of the partners.