Question

Which of the following statements is false concerning partnership liquidating distributions?

a. A partner who receives a liquidating distribution can retain an interest in the partnership.
b. Liquidating a single partner's interest is similar in concept to a corporate redemption of a shareholder's interest.
c. A partnership agreement may restrict the sale of a partnership making a liquidating distribution the only way a partner can close out his interest in the partnership.
d. None of these statements is false

Answer 1

The false statement is that liquidating a partner's interest is similar to a corporate redemption.

Step-by-step explanation:

The false statement concerning partnership liquidating distributions is option b. Liquidating a single partner's interest is NOT similar in concept to a corporate redemption of a shareholder's interest.

When a partnership goes through liquidation, the partners receive liquidating distributions in exchange for their interest in the partnership. However, unlike a corporate redemption where shares are repurchased by the corporation, liquidating a partner's interest involves the partner receiving assets of the partnership in exchange for their share.

For example, if a partner were to receive cash, inventory, or equipment in exchange for their partnership interest, they would no longer hold an interest in the partnership after receiving the distribution.