Which of the Following Statements Correctly Reflects the Rules Regarding

question 134

Multiple Choice

Which of the following statements correctly reflects the rules regarding proportionate liquidating distributions?

• A)Relief of liabilities is treated as a distribution of cash but only to the extent that the cash distribution does not exceed the partner's basis in the partnership interest.
• B)A partner's basis in distributed unrealized receivables is the lesser of the partnership's basis in the receivables or their fair market value.
• C)The basis of unrealized receivables cannot be stepped up to their fair market value unless the partner has adequate unabsorbed basis.
• D)Assets are deemed distributed in the following order: cash, unrealized receivables and inventory and finally, capital assets.
• E)The partner can recognize gain, but not loss, on a proportionate liquidating distribution.

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Definitions:

Potential Impacts

Possible effects or outcomes that may occur as a result of a specific action or event.

Basic Earnings

The net income divided by the number of outstanding shares, representing the earnings available to shareholders.

Price/Earnings Ratio

A valuation measure comparing the current share price of a company to its per-share earnings, often used to assess if a stock is over or undervalued.

Cash Flow Per Share

A measure of a firm's financial flexibility, calculated as operating cash flow divided by the number of outstanding shares.