The Partnership's Assumption of a Liability from a Partner Is

question 19

True/False

The partnership's assumption of a liability from a partner is treated as a cash distribution to the partner whose liability is assumed,which decreases his basis in the partnership.

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Definitions:

Indorsers

Individuals or entities that sign a document (often a negotiable instrument like a cheque) on the back to signify their agreement to transfer title or to guarantee its terms.

Contractually Liable

A state of being legally obligated by the terms of a contract to perform certain duties or compensate for failure to do so.

Negotiable Instruments

Negotiable instruments are formal financial documents (such as checks, promissory notes, and bills of exchange) that promise to pay a specified amount of money to a person in possession of the instrument under certain conditions.

Indorser

In finance, someone who signs a negotiable instrument, such as a check or promissory note, over to someone else, thereby transferring the rights of that document.