Scott Owns a 30% Interest in the Capital and Profits

question 59

True/False

Scott owns a 30% interest in the capital and profits of the SOS Partnership. Immediately before he receives a proportionate nonliquidating distribution from SOS, the basis of his partnership interest is $40,000. The distribution consists of $30,000 in cash and land with a fair market value of $80,000. SOS's adjusted basis in the land immediately before the distribution is $50,000. As a result of the distribution, Scott recognizes no gain or loss and his basis in the land is $10,000.

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Definitions:

Fixed Assets Turnover Ratio

A financial metric that measures a company's ability to generate sales from its fixed assets, such as property, plant, and equipment.

EPS

Earnings Per Share, a financial metric indicating the portion of a company's profit allocated to each outstanding share of common stock.

Optimal Capital Structure

The best mix of debt, preferred stock, and common equity financing that maximizes a company's stock price while minimizing its cost of capital.

Earnings Per Share

A financial ratio indicating the amount of profit attributed to each outstanding share of common stock.