George Is Planning to Retire from the GDP LLC, Where

question 44

Multiple Choice

George is planning to retire from the GDP LLC, where he is an active managing member owning a 60% interest. Capital is not a material income-producing factor to GDP. The LLC can either redeem his interest under § 736 or he can sell his interest to Dale, who currently owns a 20% interest. The LLC's operating agreement is silent regarding treatment of goodwill. As to George's alternatives, which one of the following statements is true?

• A)Either the sale or the redemption would terminate the partnership.
• B)Payments to George for his share of GDP's goodwill would be treated the same for either a sale or redemption.
• C)George will report ordinary income related to his share of "hot assets" under either the sale or the redemption scenario.
• D)If GDP/Dale negotiate payments over several years, either an installment sale or a redemption over time would result in the same tax situation to George.
• E)All of the above statements are true.

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Definitions:

Major Organic Product

The main substance produced in the highest quantity from an organic reaction.

Reaction

A process in which substances (reactants) interact to form new substances (products) with different properties.

Organic Chemistry

The branch of chemistry that studies the structure, properties, composition, reactions, and preparation of compounds that contain carbon.

4-methyl-1-pentanol

An organic compound and a type of alcohol, known for its application in solvents and intermediates in the synthesis of other compounds.