Which of the Following Statements Regarding Disproportionate Distributions Is False

question 25

Multiple Choice

Which of the following statements regarding disproportionate distributions is false?

• A) Disproportionate distributions will only occur in liquidating distributions.
• B) The tax provisions related to disproportionate distributions attempt to preserve the partners' share of ordinary income potential.
• C) A disproportionate distribution occurs when a partner receives less than his proportionate share of the partnership's hot assets.
• D) A disproportionate distribution occurs when a partner receives more than his proportionate share of the partnership's hot assets.

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Definitions:

Cumulative Preferred Stock

Cumulative Preferred Stock is a type of stock that entitles its holders to receive dividends in arrears before any dividends can be paid on common stock.

Dividends in Arrears

Dividends on cumulative preferred stock that have not been paid in the period they were due.

Current Liability

A company's debt or obligations that are due within one year and are listed on a company's balance sheet.

Treasury Stock

Shares that were once issued and fully paid for but have since been bought back by the issuing company, reducing the amount of outstanding stock on the open market.