Does Adjusting a Partner's Basis for Tax-Exempt Income Prevent Double

Multiple Choice

Does adjusting a partner's basis for tax-exempt income prevent double taxation?

A) No, making this adjustment to the partner's basis prevents the tax-exempt income from being converted to taxable income.
B) Yes, if this basis adjustment is not made the partner will be taxed once when the income is allocated to him and a second time when he sells his partnership interest.
C) Yes, if this basis adjustment is not made the partner will be taxed on the tax-exempt income when he sells his partnership interest and again if the tax-exempt income exceeds $10,000.
D) No, the partner should not adjust his tax basis by his share of tax-exempt income.