Which of the Following Statements Is True Regarding Partnership Operating

question 76

Multiple Choice

Which of the following statements is true regarding partnership operating distributions?

• A)If a partner's outside basis is greater than the bases of the assets distributed in an operating distribution, the partner will recognize a loss.
• B)If a partner's outside basis is less than the bases of the assets distributed in an operating distribution, the partner will recognize a loss.
• C)If a partner's outside basis is greater than the bases of the assets distributed in an operating distribution, the partner will recognize a gain.
• D)None of these statements is truE.See discussion on operating distributions in the text.Partners will never recognize a loss on an operating distribution.

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Definitions:

Cumulative Preferred Shares

Preferred stock where dividends accumulate if not paid in a given period and must be paid out before any dividends can be paid to common stockholders.

Dividends in Arrears

Unpaid dividends on cumulative preferred stock that must be paid before any dividends can be paid to common shareholders.

Dividend Payable

A liability recorded on the balance sheet for dividends declared by the company but not yet paid to shareholders.