If the partnership distributes property -- anything other than cash and property treated as cash -- during its liquidation, it has no immediate tax effect.
Instead, gain or loss is delayed until you sell the property.
Answer: FALSE 5) A progressive tax rate structure is one where the rate of tax increases as the tax base increases.
6) The terms “progressive tax” and “flat tax” are synonymous.
This distinguishes a liquidating dividend from regular dividends, which are issued from the company's operating profits or retained earnings. A liquidating dividend may be made in one or more installments. S., a corporation paying out liquidating dividends will issue to its shareholders a Form 1099-DIV showing the amount of the distribution.
As a result, the tax effects of a partnership that makes liquidating distributions only impacts the partners who receive them.
To be taxed as a liquidating distribution, however, a partner's interest in the partnership must terminate.
Only partners who receive a liquidating distribution of cash may have an immediate taxable gain or loss to report.
Answer: FALSE 7) A proportional tax rate is one where the rate of the tax is the same for all taxpayers, regardless of income levels.
8) Regressive tax rates decrease as the tax base increases.