When a partnership makes a current (nonliquidating) distribution, loss is never recognized. True False
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When a partnership makes a current (nonliquidating) distribution, loss is never recognized.
| True | |
| False |
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- What characteristics of a partnership justify the absorption by the other partners of the deficiency that cannot be made good by an insolvent partner? a. Limited life and mutual agency b. Limited life and co-ownership of property c. Mutual agency and partnership non-taxability d. Mutual agency and unlimited liabilityAccording to the Uniform Partnership Act, what events should occur if a partner incurs a negative capital balance during the liquidation process?If a new partner acquires partnership interest directly from the partners rather than from the partnership, a. no entry is required. b. the existing partnership is liquidated. c. the partnership assets should not be revalued because this type of transaction does not result to partnership dissolution. d. the existing partners’ capital accounts are reduced and the new partner’s capital account is increased.
- In the liquidating process, any uncollectible deficiency becomes a loss to the partnership and is divided among the remaining partners' capital balances based on their income-sharing ratio. True /falsechoose the response that correctly the following sentence about an individual partner's outside basis in a partnership. a partner's outside basis? (a) can be less than zero, (b) does not change as long as the partner maintains their partnership interest, (c) is used to apply the basis limitation to losses from a partnership, (d) must be tracked by the partnership.The partners' drawing accounts need not be closed to the capital accounts if the partnership opts to preserve the original capital balances indicated in the partnership contract True False
- Which of the following statements is FALSE? A. A basis adjustment under 734(b) attributable to a partnership distribution is designed to protect the partners who did not receive the distribution from recognizing built-in gains that belong to the distributee partner. B. In order to determine the correct tax result for payments to a deceased or retired partner, one must first determine the retiring/deceased partner's share of the fair market value of partnership assets. Unrealized receivables are not considered an "asset" for this purpose if capital is not material income producing factor (such as a law firm). C. Payments to a retiring partner that compensate the partner for his share of the fair market value of partnership property are treated as guaranteed payments. D. All of the above statements are TRUEIn the liquidation of a partnership, why might a partner be concerned that a fellow partner has a deficit net capital balance, and how might such a deficit be eliminated?A disadvantage that is NOT peculiar to the partnership form of organization includes a.the interest of a partner in the partnership cannot be transferred without the consent of the other partners. b.termination of the partnership agreement, bankruptcy of the firm, or death of one of the partners dissolves the partnership. c.each partner is individually liable for all of the debts of the partnership. d.the partners do not make the decisions that run the business.
- Potential partners might not want to form a partnership because of the risk of having their personal property forfeited in favor of the business’s creditors. True or FalseThere is no impact on the statement of comprehensive income of a partnership when a partner withdraws from the businessWhich of the following transactions or events does not affect the total assets of a partnership? A. A partnership is dissolved and its assets and liabilities are revalued to fair value. B. An old partner retires and his capital balance is settled by the partnership at a lower amount. C. An incoming partner purchases interest from an existing partner. D. A new partner is admitted in a partnership when he invested noncash asset to the partnership.
