Tom, Tina, Tatum, and Terry are equal owners (treated as general partners) in the 4-Ts LLC, a cash basis service entity. 4-Ts has unrealized receivables of $400,000 (basis of $0) and no other hot assets. A goodwill payment of $50,000 per partner is provided for in the LLC's operating agreement. If 4-Ts distributes cash of $300,000 to Tom in liquidation of his LLC interest, which of the following statements is correct? Oa. The $50,000 payment that relates to LLC goodwill cannot be deducted by the LLC. Ob. The $200,000 § 736(b) payment will be taxed to Tom as ordinary income. Oc. The partnership treats the $100,000 payment for Tom's share of unrealized receivables as part of Tom's § 736(b) payment. d. The $150,000 § 736(a) payment will result in a capital gain to Tom.
Tom, Tina, Tatum, and Terry are equal owners (treated as general partners) in the 4-Ts LLC, a cash basis service entity. 4-Ts has unrealized receivables of $400,000 (basis of $0) and no other hot assets. A goodwill payment of $50,000 per partner is provided for in the LLC's operating agreement. If 4-Ts distributes cash of $300,000 to Tom in liquidation of his LLC interest, which of the following statements is correct? Oa. The $50,000 payment that relates to LLC goodwill cannot be deducted by the LLC. Ob. The $200,000 § 736(b) payment will be taxed to Tom as ordinary income. Oc. The partnership treats the $100,000 payment for Tom's share of unrealized receivables as part of Tom's § 736(b) payment. d. The $150,000 § 736(a) payment will result in a capital gain to Tom.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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vi.2
Transcribed Image Text:Tom, Tina, Tatum, and Terry are equal owners (treated as general
partners) in the 4-Ts LLC, a cash basis service entity. 4-Ts has unrealized
receivables of $400,000 (basis of $0) and no other hot assets. A goodwill
payment of $50,000 per partner is provided for in the LLC's operating
agreement. If 4-Ts distributes cash of $300,000 to Tom in liquidation of
his LLC interest, which of the following statements is correct?
Oa. The $50,000 payment that relates to LLC goodwill cannot be deducted by the
LLC.
b. The $200,000 § 736(b) payment will be taxed to Tom as ordinary income.
Oc. The partnership treats the $100,000 payment for Tom's share of unrealized
receivables as part of Tom's § 736(b) payment.
Od. The $150,000 § 736(a) payment will result in a capital gain to Tom.
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