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:

Common Dividends

Payments made by a corporation to its common shareholders from its after-tax profits.

Professional Judgement

Professional Judgement involves applying expertise, knowledge, and experience to make informed decisions and assessments in the context of accounting and auditing.

Accrual Accounting

An accounting method that records revenues and expenses when they are incurred, regardless of when cash transactions occur, providing a more accurate picture of a company's financial health.

Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio or a company's product line to minimize risks.