Which of the following statements regarding disproportionate distributions is false?
A)A disproportionate distribution occurs when a partner receives more than his proportionate share of the partnership's hot assets.
B)A disproportionate distribution occurs when a partner receives less than his proportionate share of the partnership's hot assets.
C)The tax provisions related to disproportionate distributions attempt to preserve the partners' share of ordinary income potential.
D)Disproportionate distributions will only occur in liquidating distributions.

Question

Quizplus · Accepted Answer

Disproportionate distributions can occur during the operating life of a partnership, not just in liquidating distributions. Therefore, statement D is false. A disproportionate distribution can occur when one partner receives more or less than their proportionate share of the partnership's hot assets, which can impact their share of ordinary income potential.

Which of the Following Statements Regarding Disproportionate Distributions Is False