EG and FH partnerships merged to form the EFGH Partnership with the following pe
ID: 2558265 • Letter: E
Question
EG and FH partnerships merged to form the EFGH Partnership with the following percentages in capital and profits:
E 40%
F 30%
G 20%
H 10%
Which statement is true regarding the merger.
EFGH will be a complete new partnership and must adopt a new tax year.
Both EG and FH Partnerships are terminated on the January 1 of the next year.
EFGH will be a continuation of EG.
None of the above are true.
A.EFGH will be a complete new partnership and must adopt a new tax year.
B.Both EG and FH Partnerships are terminated on the January 1 of the next year.
C.EFGH will be a continuation of EG.
D.None of the above are true.
Explanation / Answer
If two or more partnerships merge and the partners in one of the businesses are given a majority of the interest of the merged entity, that is considered a continuation of that previuous partnership, and other previous partnerships are terminated.
As partners in EG partneship are given 60% partnership, EFGH will be a continuation of EG
The answer is C
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