If Partnership Debt Is Reduced and a Partner Is Deemed

question 7

Multiple Choice

If partnership debt is reduced and a partner is deemed to receive a cash distribution, what impact does the deemed distribution have on the partner if it is in excess of her tax basis?

• A)The partner will treat the distribution in excess of her basis as ordinary income.
• B)The partner will treat the distribution in excess of her basis as capital gain.
• C)The partner will not ever be taxed on the distribution in excess of her basis.
• D)The partner will not be taxed on the distribution in excess of her basis until she sells her partnership interest.

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Definitions:

Price of Hamburgers

The price of hamburgers refers to the cost at which hamburgers are sold, influenced by factors such as production costs, demand, and market competition.

Hamburger Restaurant

is a specific type of dining establishment that specializes in the preparation and sale of hamburgers alongside various accompaniments.

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a given price level in a given time period.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level in a given time period.