Multiple Choice
The December 31,2008,balance sheet of the RST General Partnership reads as follows.
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 31,2008,he 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 § 736(a) payment will be $2,500.
B) If capital IS a material income-producing factor, the entire $60,000 payment will be a § 736(b) 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 which is a § 736(a) payment since it will be determined without regard to partnership profits.
E) All statements are false.
Correct Answer:

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Correct Answer:
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