Martha Is a 40percent Partner in the MMM Partnership, with an Outside

question 117

True/False

Martha is a 40percent partner in the MMM Partnership, with an outside basis of $50,000. MMM distributes $40,000 cash and accrual-basis accounts receivable with a basis and fair market value of $20,000. Martha does not recognize gain or loss on the distribution and takes a basis in the cash of $40,000 and a basis in the receivables of $10,000.

---

Definitions:

Partnership

A legal form of business operation between two or more individuals who share management and profits.

UPA

Uniform Partnership Act, which governs the operation of partnerships within the United States.

Legal Entity

A legal entity is any company or organization that has legal rights and responsibilities, including the ability to enter into contracts, sue, and be sued.

Unlimited Liability

A legal obligation where an individual's responsibility for debts extends beyond what was invested into a business, potentially affecting personal assets.