Question

Whitch of the following statements is false concerning the requirements of the atom bomb test (...

Whitch of the following statements is false concerning the requirements of the atom bomb test ( construction liquidation) of regulation section 1.752-1
A limited partners not general partners are deemed to have their interest liquidated
B partners must restore negative capital accounts after the constructive liquidation
C. Partnership assets are considered to be worthless and sold for their worthless value
D partnership liabilities are deemed to be due and payable

Homework Answers

Answer #1

Option A is the answer

Under the regulation a hypothetical worst case scenario is assumed and the partner is required to bear the economic risk of loss. The partner is required to make capital contribution or pay the creditors in this scenario. All partners assets are liquidated including general partners.

Option B is true since all partners with negative accounts are required to restor their accounts.

Option C is true since all assets including cash are deemed worthless by the regulation.

Option D is true since at the time when all assets are considered worthless, all liabities are assumed to be due.

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