Tom and William are equal partners in the TW Partnership.Just before TW liquidated, Tom's capital account balance was $50,000 and William's capital account balance was $30,000.To meet the substantial economic effect requirements, any liquidating cash distribution must be allocated equally between the partners.

Question

Quizplus · Accepted Answer

The substantial economic effect requirement does not require equal allocation of cash distributions between partners. The distribution must be allocated based on the partners' capital account balances, which in this case would result in Tom receiving a larger share of the distribution than William.

Tom and William Are Equal Partners in the TW Partnership