From a tax perspective, which entity choice is preferred when a liquidating distribution occurs and the entity has appreciated assets?
A)Partnership.
B)S corporation.
C)C corporation.
D)S corporation and C corporation.

Question

Quizplus · Accepted Answer

Partnerships are generally preferred for tax purposes when a liquidating distribution occurs and the entity has appreciated assets because partnerships can distribute appreciated property to their partners without triggering a tax at the entity level. This contrasts with C corporations, where liquidating distributions of appreciated assets can result in double taxation (once at the corporate level and again at the shareholder level). S corporations can also distribute appreciated assets without triggering a corporate-level tax, but there are limitations and potential tax consequences under certain circumstances that make partnerships more favorable.

From a Tax Perspective, Which Entity Choice Is Preferred When