From a Tax Perspective, Which Entity Choice Is Preferred When

question 4

Multiple Choice

From a tax perspective, which entity choice is preferred when a liquidating distribution occurs and the entity has assets that have declined in value?

• A)Partnership.
• B)S corporation.
• C)LLC.
• D)Partnership and S corporation.
• E)S corporation and LLC.

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Definitions:

Investment

The process of distributing funds with the goal of earning additional income or profits.

Withdrawal

Money taken out from a business by its owner for personal use, decreasing the owner’s equity in the business.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, presented in a structured manner.

Interrelationships

The way in which each of two or more things is related to the other or others.