Which of the following is not a requirement of the substantial economic effect test? a. An allocation of income must increase the partner's capital account balance, and an allocation of deduction must decrease the § 704(b) book partner's capital account balance. b. Income, gains, losses, and deductions must be allocated to the partners in accordance with their capital contributions. C. A partner with a negative § 704(b) book capital account balance must restore that capital account, generally by contributing cash to the partnership. d. On liquidation of the partner's interest in the partnership, the partner must receive assets that have a fair market value equal to that partner's (positive) § 704(b) book capital account balance.
Which of the following is not a requirement of the substantial economic effect test? a. An allocation of income must increase the partner's capital account balance, and an allocation of deduction must decrease the § 704(b) book partner's capital account balance. b. Income, gains, losses, and deductions must be allocated to the partners in accordance with their capital contributions. C. A partner with a negative § 704(b) book capital account balance must restore that capital account, generally by contributing cash to the partnership. d. On liquidation of the partner's interest in the partnership, the partner must receive assets that have a fair market value equal to that partner's (positive) § 704(b) book capital account balance.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Which of the following is not a requirement of the
substantial economic effect test?
a. An allocation of income must increase the partner's capital
account balance, and an allocation of deduction must decrease
the § 704(b) book partner's capital account balance.
b. Income, gains, losses, and deductions must be allocated to the
partners in accordance with their capital contributions.
C. A partner with a negative § 704(b) book capital account balance
must restore that capital account, generally by contributing cash
to the partnership.
Od. On liquidation of the partner's interest in the partnership, the
partner must receive assets that have a fair market value equal to
that partner's (positive) § 704(b) book capital account balance.
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