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

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.