Identify Which of the Following Statements Is True

question 94

Multiple Choice

Identify which of the following statements is true.

• A)To have a bona fide partial liquidation, a firm must continue to conduct a qualified trade or business, which it had conducted for a period of more than three years prior to the redemption.
• B)To qualify as a partial liquidation, a distribution must result in a bona fide contraction of the corporate business at the corporate level.
• C)A partial liquidation of a corporation must be pro rata.
• D)All of the above are false.

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Definitions:

Sunk Cost

A cost that has already been incurred and cannot be recovered, which should not affect future business decisions.

Incremental Overhead

The additional overhead costs incurred as a result of a specific business activity or decision.

Salary Expense

The total amount paid to employees for services rendered during a specific period, usually shown in the income statement.

Opportunity Cost

The value of the best alternative forgone when a choice is made between different options.