Identify which of the following statements is false.
A)Jean and Blossom form an equal partnership. Jean contributes $10,000 cash and Blossom contributes property with a $10,000 FMV and a $5,000 basis. When the partnership sells the property contributed by Blossom for $10,000 shortly after the formation, Blossom must include the $5,000 gain in her income.
B)In order to shift income/loss between partners, there must be substantial economic effect.
C)The BB Partnership wants to make a special allocation of $10,000 of long-term capital gain to Bob and a special allocation of $10,000 of ordinary income to Briana. This allocation will have a substantial economic effect.
D)Partners must make up negative balances in their capital accounts upon liquidation of the partnership.

Question

Quizplus · Accepted Answer

The special allocation may not have substantial economic effect because the partnership may not have enough economic income to justify the allocation. The other statements are all true.

Identify Which of the Following Statements Is False