Curry's sale of her partnership interest causes a partnership termination. The partnership's business and financial operations are continued by the other members. What is (are) the effect(s) of the termination?
I.
There is a deemed distribution of assets to the remaining partners and the purchaser.
II.
There is a hypothetical recontribution of assets to a new partnership.
Choice "D" is correct.Rule: When a partnership is terminated for tax purposes and its remaining partners decide to carry on the partnership business in a (deemed) new partnership, tax law treats this as a distribution of the prior partnership's assets followed by a recontribution of the (deemed) distributed assets to the new partnership.Choices "b", "c", and "a" are incorrect, per the above rule.
