In Which of the Following Independent Situations Would the Transaction

question 112

Multiple Choice

In which of the following independent situations would the transaction most likely be characterized as a disguised sale?

• A)Partner George contributes appreciated property to the GMVV Partnership, and three years later GMVV distributes $100,000 proportionately to all the partners.
• B)Brianna contributes property with a basis of $20,000 and a fair market value of $50,000 to the BGB Partnership in exchange for a 20% interest therein.The partnership agrees to distribute $20,000 to Brianna in fifteen months, if partnership cash flows from operations exceed $100,000 at that time.The partnership does not expect to produce operating cash flows of over $100,000 for at least five years.
• C)Luis contributes appreciated property to the BLP Partnership.Thirty months later, he receives a distribution from the partnership of $15,000 cash.None of the other partners received a distribution.There was no agreement that BLP would make the distribution, and Luis would have made the contribution whether or not the partnership made the distribution.
• D)None of the above transactions will be treated as a disguised sale.
• E)a., b., and c.are all treated as disguised sales.

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Definitions:

Authorized

Refers to the official approval or permission for something, often used in the context of authorized shares in a corporation.

Outstanding

Describes something that is currently due or has not been settled or resolved, often referring to payments or checks.

Treasury Stock

Shares once issued and then retrieved by the originating company, lowering the volume of shares trading on the open market.

Par Value

A nominal or face value given to a share of stock or a bond, often used in accounting to determine legal capital or in the issuance of shares.