Which of the following is not a requirement of the substantial economic effect test? a. An allocation of income must increase the partner's capital account balance, and an allocation of deduction must decrease the § 704(b) book partner's capital account balance. b. Income, gains, losses, and deductions must be allocated to the partners in accordance with their capital contributions. C. A partner with a negative § 704(b) book capital account balance must restore that capital account, generally by contributing cash to the partnership. d. On liquidation of the partner's interest in the partnership, the partner must receive assets that have a fair market value equal to that partner's (positive) § 704(b) book capital account balance.

Which of the following is not a requirement of the substantial economic effect test? a. An allocation of income must increase the partner's capital account balance, and an allocation of deduction must decrease the § 704(b) book partner's capital account balance. b. Income, gains, losses, and deductions must be allocated to the partners in accordance with their capital contributions. C. A partner with a negative § 704(b) book capital account balance must restore that capital account, generally by contributing cash to the partnership. d. On liquidation of the partner's interest in the partnership, the partner must receive assets that have a fair market value equal to that partner's (positive) § 704(b) book capital account balance.

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter10: Partnership Taxation

Section: Chapter Questions

Problem 23MCQ

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