George Is Planning to Retire from the GDP LLC, Where

question 44

Multiple Choice

George is planning to retire from the GDP LLC, where he is an active managing member owning a 60% interest. Capital is not a material income-producing factor to GDP. The LLC can either redeem his interest under § 736 or he can sell his interest to Dale, who currently owns a 20% interest. The LLC's operating agreement is silent regarding treatment of goodwill. As to George's alternatives, which one of the following statements is true?

• A)Either the sale or the redemption would terminate the partnership.
• B)Payments to George for his share of GDP's goodwill would be treated the same for either a sale or redemption.
• C)George will report ordinary income related to his share of "hot assets" under either the sale or the redemption scenario.
• D)If GDP/Dale negotiate payments over several years, either an installment sale or a redemption over time would result in the same tax situation to George.
• E)All of the above statements are true.

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Definitions:

Adult Thoughts

Cognitive processes or reflections typically characterized by greater complexity, abstraction, or maturity, associated with the mental capacity of adults.

Creative Impulse

The innate drive or motivation within individuals to bring about new ideas, solutions, or artistic expressions.

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The method by which a conclusion is reached through the synchronization of several generally accepted premises.

Theoretical Reasoning

The process of systematically working through concepts and principles in a logical manner to understand or explain phenomena.