Which of the following terms describes the scenario in which all partnership liabilities are deemed to...
Which of the following terms describes the scenario in which all partnership liabilities are deemed to be payable in full and all partnership assets are deemed to have a value of zero?
| A. | Termination | ||
| B. | Capital interest | ||
| C. | Profit allocation | ||
| D. | Constructive liquidation |
Homework Answers
Upon a constructive liquidation, all of the following events are deemed to occur simultaneously:
(i) All of the partnership's liabilities become payable in full;
(ii) With the exception of property contributed to secure a partnership liability (see § 1.752-2(h)(2)), all of the partnership's assets, including cash, have a value of zero;
The answer is thus D.
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