Which of the following statements concerning partnerships is false?
A) A properly-drafted partnership agreement is crucial.
B) A general partner's basis in a partnership includes his share of partnership debt.
C) Limited partnerships must have at least one general partner.
D) A partner is taxed annually on only that portion of a partnership's taxable income that is actually distributed.

Question

Quizplus · Accepted Answer

A partner may be taxed on their share of the partnership's taxable income whether or not it is distributed to them. This is known as "phantom income" and can arise if the partnership earns taxable income but does not make cash distributions to its partners.

Which of the Following Statements Concerning Partnerships Is False