Which of the Following Is Not a Requirement of the Substantial

question 3

Multiple Choice

Which of the following is not a requirement of the substantial economic effect test?

• A) Income, gains, losses, and deductions must be allocated to the partners in accordance with their capital contributions.
• B) An allocation of income must increase the partner's capital account balance, and an allocation of deduction must decrease the partner's capital account balance.
• C) A partner with a negative capital account balance must restore that capital account, generally by contributing cash to the partnership.
• D) On liquidation of the partner's interest in the partnership, the partner must receive assets that have a fair market value equal to that partner's (positive) capital account balance.
• E) All of these are requirements of the substantial economic effect test.

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Definitions:

Fault Line

A fracture or zone of fractures between two blocks of rock, allowing the blocks to move relative to each other, often associated with earthquakes.

Sequences of Rocks

The order and position of layers of rock, indicating their relative ages and the geological history of a region.

North America

A continent entirely within the Northern Hemisphere and almost all within the Western Hemisphere; it is bordered by the Arctic Ocean to the north, the Atlantic Ocean to the east, the Pacific Ocean to the west, and South America and the Caribbean Sea to the southeast.

South Pole

The southernmost point on the Earth's surface, depicted as the point where the Earth's axis of rotation intersects its surface in the Antarctic.