Randi Owns a 40% Interest in the Capital and Profits

question 58

True/False

Randi owns a 40% interest in the capital and profits of the RAY Partnership.Immediately before she receives a proportionate nonliquidating distribution from RAY, the basis for her partnership interest is $60,000.The distribution consists of $45,000 in cash and land with a fair market value of $72,000.RAY's adjusted basis in the land immediately before the distribution is $36,000.As a result of the distribution, Randi recognizes a gain of $21,000.

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Definitions:

Deferred Tax Liabilities

Tax liabilities that emerge from the temporary discrepancies between the accounting and tax valuation of assets and liabilities.

Tax Law

Tax law encompasses the rules, policies, and regulations that oversee the tax process for individuals, businesses, and other entities, determining how taxes are calculated, collected, and managed.

Liability Approach

A method in accounting where emphasis is placed on accruing all expected future costs and obligations.

Income Tax Expense

The total amount of income tax a company owes to the government for a specified period, reflected in its financial statements.