Which of the Following Transactions Will Not Result in Termination

question 70

Multiple Choice

Which of the following transactions will not result in termination of a partnership for Federal tax purposes?

• A)The partnership is incorporated.
• B)A 70% interest in partnership capital and profits is sold to a third party purchaser.
• C)Cash is distributed in liquidation of a 60% partner's interest in a five-partner partnership.
• D)A 40% interest in partnership capital and profits is sold to the other partner in a two-partner partnership.
• E)None of the above.

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Definitions:

Capital Budgeting

The process of planning and evaluating investments in long-term assets to determine which projects will generate the most profitable returns.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts, making the expense predictable and consistent.

Income Taxes

Taxes levied by governments on individuals' or businesses' net income, where the amount owed varies based on the level of the income earned.

Operating Cash Inflow

Cash generated from a company's primary business operations, excluding non-operational sources like investments or financing.