Identify Which of the Following Statements Is False

question 30

Multiple Choice

Identify which of the following statements is false.

• A) The BB Partnership wants to make a special allocation of $10,000 of long- term capital gain to Bob and a special allocation of $10,000 of ordinary income to Briana. This allocation will have a substantial economic effect.
• B) Partners must make up negative balances in their capital accounts upon liquidation of the partnership.
• C) Jean and Blossom form an equal partnership. Jean contributes $10,000 cash and Blossom contributes property with a $10,000 FMV and a $5,000 basis. When the partnership sells the property contributed by Blossom for $10,000 shortly after the formation, Blossom must include the $5,000 gain in her income.
• D) In order to shift income/loss between partners, there must be substantial economic effect.

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Definitions:

Bankruptcy Reform Act

Legislation intended to overhaul the bankruptcy system, typically making it more difficult for individuals to file for bankruptcy and to discharge certain types of debt.

Debtor's Assets

All the property and financial resources owned by an individual or organization that owes money to creditors.

Title 11

A reference usually to the United States Bankruptcy Code, governing bankruptcy in the United States.

Liquidation Proceedings

Legal processes aimed at winding up a company's operations, selling its assets, and distributing the proceeds among creditors and shareholders.