If Partnership Debt Is Reduced and a Partner Is Deemed

question 7

Multiple Choice

If partnership debt is reduced and a partner is deemed to receive a cash distribution, what impact does the deemed distribution have on the partner if it is in excess of her tax basis?

• A)The partner will treat the distribution in excess of her basis as ordinary income.
• B)The partner will treat the distribution in excess of her basis as capital gain.
• C)The partner will not ever be taxed on the distribution in excess of her basis.
• D)The partner will not be taxed on the distribution in excess of her basis until she sells her partnership interest.

---

Definitions:

Personal Communication

Exchange of information and ideas between individuals through verbal, non-verbal, or written means on a personal level.

Work Relationships

Interpersonal associations formed between colleagues within a workplace, influencing the work environment and productivity.

Communicating

The process of conveying information or expressing thoughts and feelings through verbal or non-verbal means.

Nature of the Business

The fundamental characteristics and operations that define a company's core activities and purposes.