Tom, Tina, Tatum, and Terry Are Equal Owners in the 4-Ts

question 73

Multiple Choice

Tom, Tina, Tatum, and Terry are equal owners in the 4-Ts LLC, a cash basis service entity. 4-Ts has unrealized receivables of $400,000 (basis of $0) , and no other hot assets. A goodwill payment of $50,000 per partner is provided for in the LLC's operating agreement. If 4-Ts distributes cash of $300,000 to Tom in liquidation of his LLC interest, which of the following statements is correct?

• A)This is a proportionate distribution with respect to hot assets.
• B)The $50,000 payment that relates to LLC goodwill cannot be deducted by the LLC.
• C)The partnership will terminate.
• D)The $150,000 § 736(a) payment will result in a capital gain to Tom.
• E)The $200,000 § 736(b) payment will be taxed to Tom as ordinary income.

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Definitions:

Flexing

The action of contracting a muscle or group of muscles to cause movement of a limb or other body part.

Hyperextending

The act of extending a limb or joint beyond its normal range of motion, which can lead to strain, injury, or damage of tissues.

Multiaxial Joint

A type of synovial joint that allows for movement along multiple planes and axes.

Humeroscapular

Pertaining to the humerus (upper arm bone) and the scapula (shoulder blade), often related to the shoulder joint.