Question 1

Match the following independent distribution payments in liquidation of a partner's interest in an ongoing partnership with the statements below.
-Distribution of $100,000 cash representing the partner's share of the value of partnership equipment that has potential depreciation recapture of $25,000.
A)A payment for the partner's share of partnership income under § 736a).
B)A payment for the partner's share of partnership property under § 736b).
C)The payment includes both a § 736a) and a § 736b) element.

Accepted Answer

This distribution is considered a payment for the partner's share of partnership property under § 736(b) because it represents the partner's share of the value of a specific partnership asset (equipment) rather than a share of partnership income or guaranteed payments for services or capital.

Question 2

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Step down
A)Includes the partner's share of partnership liabilities.
B)Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)Liquidation payments from this type of partnership are always § 736b) payments.
D)Could arise if a distribution results in loss to the distributee partner.
E)May be a § 736a) payment.
F)May receive § 736a) payments.
G)Probably treated as a general partner for § 736 purposes
H)Conversion of an LLC to a C corporation
I)Liquidation payments from this type of partnership may include § 736a) payments.
J)A § 736b) payment.
K)Adjustment designed to bring inside and outside bases into balance.
L)Partnership asset basis is at least $250,000 > FMV.
M)No correct match is provided.

Accepted Answer

The answer of Match the following statements with the best...

Question 3

Match the following independent distribution payments in liquidation of a partner's interest in an ongoing partnership with the statements below.
-Distribution of $60,000 cash for a partner's share of unrealized receivables when the partner is a general partner and most of the partnership's income is derived from services.
A)A payment for the partner's share of partnership income under § 736a).
B)A payment for the partner's share of partnership property under § 736b).
C)The payment includes both a § 736a) and a § 736b) element.

Accepted Answer

The payment is for the partner's share of partnership income under § 736(a) because it relates to unrealized receivables, which are considered income items rather than partnership property.

Question 4

Match the following independent descriptions as hot i.e., ordinary income-producing) or nonhot assets with the following statements.
-Installment receivables for sale of a capital asset.
A)Hot assets for purposes of distributions, liquidation of a partnership interest under § 736, and sale of a partnership interest.
B)May be a hot asset for some but not all the purposes stated in a).
C)Not a hot asset.

Accepted Answer

Installment receivables for the sale of a capital asset are generally considered nonhot assets because they do not generate ordinary income but rather capital gains, which are treated differently for tax purposes.

Question 5

Match the following independent distribution payments in liquidation of a partner's interest in an ongoing partnership with the statements below.
-Distribution of $25,000 cash for a partner's share of substantially appreciated inventory.
A)A payment for the partner's share of partnership income under § 736a).
B)A payment for the partner's share of partnership property under § 736b).
C)The payment includes both a § 736a) and a § 736b) element.

Accepted Answer

A distribution of $25,000 cash for a partner's share of substantially appreciated inventory is considered a payment for the partner's share of partnership property under § 736(b). This section deals with payments made in liquidation of the partner's interest in partnership property, including appreciated inventory.

Question 6

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Section 754
A)Includes the partner's share of partnership liabilities.
B)Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)Liquidation payments from this type of partnership are always § 736b) payments.
D)Could arise if a distribution results in loss to the distributee partner.
E)May be a § 736a) payment.
F)May receive § 736a) payments.
G)Probably treated as a general partner for § 736 purposes
H)Conversion of an LLC to a C corporation
I)Liquidation payments from this type of partnership may include § 736a) payments.
J)A § 736b) payment.
K)Adjustment designed to bring inside and outside bases into balance.
L)Partnership asset basis is at least $250,000 > FMV.
M)No correct match is provided.

Accepted Answer

The answer of Match the following statements with the best...

Question 7

Match the following independent distribution payments in liquidation of a partner's interest in an ongoing partnership with the statements below.
-Distribution of $60,000 cash for a partner's share of unrealized receivables when the partner is a limited partner and most of the partnership's income is derived from services.
A)A payment for the partner's share of partnership income under § 736a).
B)A payment for the partner's share of partnership property under § 736b).
C)The payment includes both a § 736a) and a § 736b) element.

Accepted Answer

This distribution is considered a payment for the partner's share of partnership property under § 736(b), as it involves the liquidation of the partner's interest in the partnership's unrealized receivables, which are considered property of the partnership.

Question 8

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Partnership terminates
A)Includes the partner's share of partnership liabilities.
B)Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)Liquidation payments from this type of partnership are always § 736b) payments.
D)Could arise if a distribution results in loss to the distributee partner.
E)May be a § 736a) payment.
F)May receive § 736a) payments.
G)Probably treated as a general partner for § 736 purposes
H)Conversion of an LLC to a C corporation
I)Liquidation payments from this type of partnership may include § 736a) payments.
J)A § 736b) payment.
K)Adjustment designed to bring inside and outside bases into balance.
L)Partnership asset basis is at least $250,000 > FMV.
M)No correct match is provided.

Accepted Answer

The answer of Match the following statements with the best...

Question 9

Match the following independent distribution payments in liquidation of a partner's interest in an ongoing partnership with the statements below.
-Distribution of $100,000 cash to a managing member general partner) in a cash basis service-oriented LLC for the member's share of unrealized receivables and land.
A)A payment for the partner's share of partnership income under § 736a).
B)A payment for the partner's share of partnership property under § 736b).
C)The payment includes both a § 736a) and a § 736b) element.

Accepted Answer

The distribution includes both a payment for the partner's share of partnership income (unrealized receivables, which are considered income as they are realized) under § 736(a) and a payment for the partner's share of partnership property (land) under § 736(b).

Question 10

Match the following independent descriptions as hot i.e., ordinary income-producing) or nonhot assets with the following statements.
-Cash basis accounts receivable.
A)Hot assets for purposes of distributions, liquidation of a partnership interest under § 736, and sale of a partnership interest.
B)May be a hot asset for some but not all the purposes stated in a).
C)Not a hot asset.

Accepted Answer

Cash basis accounts receivable are considered hot assets because they represent income that has been earned but not yet received, making them ordinary income-producing assets.

Question 11

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Stated goodwill
A)Includes the partner's share of partnership liabilities.
B)Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)Liquidation payments from this type of partnership are always § 736b) payments.
D)Could arise if a distribution results in loss to the distributee partner.
E)May be a § 736a) payment.
F)May receive § 736a) payments.
G)Probably treated as a general partner for § 736 purposes
H)Conversion of an LLC to a C corporation
I)Liquidation payments from this type of partnership may include § 736a) payments.
J)A § 736b) payment.
K)Adjustment designed to bring inside and outside bases into balance.
L)Partnership asset basis is at least $250,000 > FMV.
M)No correct match is provided.

Accepted Answer

The answer of Match the following statements with the best...

Question 12

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Service-providing partnership
A)Includes the partner's share of partnership liabilities.
B)Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)Liquidation payments from this type of partnership are always § 736b) payments.
D)Could arise if a distribution results in loss to the distributee partner.
E)May be a § 736a) payment.
F)May receive § 736a) payments.
G)Probably treated as a general partner for § 736 purposes
H)Conversion of an LLC to a C corporation
I)Liquidation payments from this type of partnership may include § 736a) payments.
J)A § 736b) payment.
K)Adjustment designed to bring inside and outside bases into balance.
L)Partnership asset basis is at least $250,000 > FMV.
M)No correct match is provided.

Accepted Answer

The answer of Match the following statements with the best...

Question 13

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Capital intensive partnership
A)Includes the partner's share of partnership liabilities.
B)Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)Liquidation payments from this type of partnership are always § 736b) payments.
D)Could arise if a distribution results in loss to the distributee partner.
E)May be a § 736a) payment.
F)May receive § 736a) payments.
G)Probably treated as a general partner for § 736 purposes
H)Conversion of an LLC to a C corporation
I)Liquidation payments from this type of partnership may include § 736a) payments.
J)A § 736b) payment.
K)Adjustment designed to bring inside and outside bases into balance.
L)Partnership asset basis is at least $250,000 > FMV.
M)No correct match is provided.

Accepted Answer

The answer of Match the following statements with the best...

Question 14

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Sales price of partnership interest
A)Includes the partner's share of partnership liabilities.
B)Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)Liquidation payments from this type of partnership are always § 736b) payments.
D)Could arise if a distribution results in loss to the distributee partner.
E)May be a § 736a) payment.
F)May receive § 736a) payments.
G)Probably treated as a general partner for § 736 purposes
H)Conversion of an LLC to a C corporation
I)Liquidation payments from this type of partnership may include § 736a) payments.
J)A § 736b) payment.
K)Adjustment designed to bring inside and outside bases into balance.
L)Partnership asset basis is at least $250,000 > FMV.
M)No correct match is provided.

Accepted Answer

The answer of Match the following statements with the best...

Question 15

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Mandatory step down
A)Includes the partner's share of partnership liabilities.
B)Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)Liquidation payments from this type of partnership are always § 736b) payments.
D)Could arise if a distribution results in loss to the distributee partner.
E)May be a § 736a) payment.
F)May receive § 736a) payments.
G)Probably treated as a general partner for § 736 purposes
H)Conversion of an LLC to a C corporation
I)Liquidation payments from this type of partnership may include § 736a) payments.
J)A § 736b) payment.
K)Adjustment designed to bring inside and outside bases into balance.
L)Partnership asset basis is at least $250,000 > FMV.
M)No correct match is provided.

Accepted Answer

The answer of Match the following statements with the best...

Question 16

Match the following statements with the best match from the following choices. Choice M may be used more than once.
-Step up
A)Includes the partner's share of partnership liabilities.
B)Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C)Liquidation payments from this type of partnership are always § 736b) payments.
D)Could arise if a distribution results in loss to the distributee partner.
E)May be a § 736a) payment.
F)May receive § 736a) payments.
G)Probably treated as a general partner for § 736 purposes
H)Conversion of an LLC to a C corporation
I)Liquidation payments from this type of partnership may include § 736a) payments.
J)A § 736b) payment.
K)Adjustment designed to bring inside and outside bases into balance.
L)Partnership asset basis is at least $250,000 > FMV.
M)No correct match is provided.

Accepted Answer

The answer of Match the following statements with the best...

Question 17

Match the following independent distribution payments in liquidation of a partner's interest in an ongoing partnership with the statements below.
-Distribution of $10,000 cash to a general partner for goodwill when goodwill is provided for in the partnership agreement, and the partnership derives most of its income from services.
A)A payment for the partner's share of partnership income under § 736a).
B)A payment for the partner's share of partnership property under § 736b).
C)The payment includes both a § 736a) and a § 736b) element.

Accepted Answer

This payment is considered a distribution for the partner's share of partnership property under § 736(b) because it relates to the goodwill of the partnership, which is a capital asset, and the partnership agreement specifically provides for such a distribution. Payments under § 736(b) generally pertain to distributions of partnership property in liquidation of a partner's interest.

Question 18

Match the following independent descriptions as hot i.e., ordinary income-producing) or nonhot assets with the following statements.
-Inventory with a basis of $10,000 and a fair market value of $15,000.
A)Hot assets for purposes of distributions, liquidation of a partnership interest under § 736, and sale of a partnership interest.
B)May be a hot asset for some but not all the purposes stated in a).
C)Not a hot asset.

Accepted Answer

Inventory is considered a hot asset because it generates ordinary income, fitting the criteria for distributions, liquidation of a partnership interest under § 736, and sale of a partnership interest.

Question 19

Match the following independent descriptions as hot i.e., ordinary income-producing) or nonhot assets with the following statements.
-Marketable securities not held as inventory).
A)Hot assets for purposes of distributions, liquidation of a partnership interest under § 736, and sale of a partnership interest.
B)May be a hot asset for some but not all the purposes stated in a).
C)Not a hot asset.

Accepted Answer

Marketable securities not held as inventory are generally considered nonhot assets because they do not generate ordinary income like hot assets do. Hot assets typically include items like inventory and receivables that produce ordinary income, whereas marketable securities are usually capital assets.

Question 20

Match the following independent distribution payments in liquidation of a partner's interest in an ongoing partnership with the statements below.
-Distribution of $10,000 cash to a limited partner for goodwill when goodwill is not provided for in the partnership agreement.
A)A payment for the partner's share of partnership income under § 736a).
B)A payment for the partner's share of partnership property under § 736b).
C)The payment includes both a § 736a) and a § 736b) element.

Accepted Answer

This payment is considered a distribution for the partner's share of partnership property under § 736(b) because it is a liquidating payment not related to the partner's share of partnership income and is made for an interest in the partnership's goodwill, which is a capital asset.

Quiz 11: Partnerships: Distributions, Transfer of Interests, and Terminations

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Step down

Match the following independent descriptions as hot i.e., ordinary income-producing) or nonhot assets with the following statements. -Installment receivables for sale of a capital asset.

Match the following independent distribution payments in liquidation of a partner's interest in an ongoing partnership with the statements below. -Distribution of $25,000 cash for a partner's share of substantially appreciated inventory.

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Section 754

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Partnership terminates

Match the following independent descriptions as hot i.e., ordinary income-producing) or nonhot assets with the following statements. -Cash basis accounts receivable.

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Stated goodwill

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Service-providing partnership

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Capital intensive partnership

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Sales price of partnership interest

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Mandatory step down

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Step up

Match the following independent descriptions as hot i.e., ordinary income-producing) or nonhot assets with the following statements. -Inventory with a basis of $10,000 and a fair market value of $15,000.

Match the following independent descriptions as hot i.e., ordinary income-producing) or nonhot assets with the following statements. -Marketable securities not held as inventory) .

Match the following independent distribution payments in liquidation of a partner's interest in an ongoing partnership with the statements below. -Distribution of $10,000 cash to a limited partner for goodwill when goodwill is not provided for in the partnership agreement.