A Partnership Terminates for Tax Purposes

question 23

Multiple Choice

A partnership terminates for tax purposes

• A)only when it terminates under local partnership law.
• B)when at least 50% of the total interest in partnership capital and profits changes hands by sale or exchange within twelve consecutive months.
• C)when the sale of partnership assets is made only to an outsider(s)and not to an existing partner(s).
• D)when a partnership tax return (Form 1065)ceases to be filed by the partnership.

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Definitions:

After-Tax Cost

The actual cost of an expense or investment after accounting for the effects of taxes, providing a more accurate measure of the expense's or investment's true financial impact.

Target Capital Structure

The mixture of debt, equity, and other financing sources a firm aims to hold to maximize its stock value.

Equity Firm

A company that invests in businesses, typically by buying majority ownership to control and manage the companies.

Dividend Payout

A portion of a company's earnings that is distributed to its shareholders as a return on their investment.