The December 31 balance sheet of the RST General Partnership reads as follows.

\begin{array} { l r r } & \text { Adjusted } \\& \text { Basis } & \text { FMV } \\\text { Cash } & \$ 65,000 & \$ 65,000 \\\text { Receivables } & -0- & 7,500 \\\text { Capital and } \S 1231 \text { assets } & {55,000}&{100,000} \\\text { Total } & \$ 120,000 & \$ 172,500\\\hline\end{array}

\begin{array}{lrr}\text { Roy, capital } & \$ 40,000 & \$ 57,500 \\\text { Sue, capital } & 40,000 & 57,500 \\\text { Ted, capital } & {40,000}&{57,500} \\\text { Total } & \$ 120,000 & \$ 172,500\end{array}

The partners share equally in partnership capital, income, gain, loss, deduction, and credit. Ted's adjusted basis for his partnership interest is $40,000. On December 31, general partner Ted retires from the partnership, receiving a $60,000 cash payment in liquidation of his interest. The partnership agreement states that $2,500 of the payment is for goodwill. Which of the following statements about this distribution is false?
A) If capital is not a material income-producing factor to the partnership, the § 736a) payment will be $2,500.
B) If capital is a material income-producing factor, the entire $60,000 payment will be a § 736b) property payment.
C) The payment for Ted's share of goodwill will create $2,500 of ordinary income to him.
D) The partnership can deduct any amount that is a § 736a) payment because it will be determined without regard to partnership profits.
E) All statements are false.

Which of the Following Is Not Typically Considered a Hot

Multiple Choice

Correct Answer:VerifiedUnlock this answer nowGet Access to more Verified Answers free of chargeAccess For Free

Correct Answer:
Verified
Unlock this answer now
Get Access to more Verified Answers free of charge