Identify Which of the Following Statements Is True

question 68

Multiple Choice

Identify which of the following statements is true.

• A)If a partner sells property received in a partnership distribution for a gain and the property was inventory in the hands of the distributing partnership, the partner will always recognize ordinary income.
• B)The primary purpose of Sec. 751 is to prevent partnerships from converting capital gains into ordinary income.
• C)Unrealized receivables include rights to payments on the sale of a capital asset.
• D)All of the above are false.

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Definitions:

Net Profits

The sum left over once all costs, taxes, and expenses have been deducted from the total income.

Partnership Status

The legal standing of a business entity comprising two or more individuals who share management and profits.

Compensation

Payment or benefits awarded to individuals for their services, labor, or for losses suffered.