Tom and Terry Are Equal Owners in the Tatum LLC,a

question 25

Multiple Choice

Tom and Terry are equal owners in the Tatum LLC,a cash basis service entity.Tatum has unrealized receivables of $400,000 (basis of $0) ,and no other hot assets.Goodwill is provided for in the LLC's operating agreement.If Tatum distributes cash of $500,000 to Tom in liquidation of his LLC interest,which of the following statements is incorrect?

• A)This is a disproportionate distribution with respect to hot assets.
• B)Any portion of the payment that relates to LLC goodwill can be deducted by the LLC as a § 736(a)payment.
• C)The payment for Tom's share of the LLC's investment real estate is a § 736(b)payment.
• D)Any § 736(a)payment will result in ordinary income to Tom.
• E)Any § 736(b)payment will be treated as a payment in exchange for Tom's LLC interest.

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