In order to meet the economic effect of safe harbors of section 704(b) regulatio

Question

In order to meet the economic effect of safe harbors of section 704(b) regulations which of the following statements is the most true? A a negative capital account must be restored by the end of the tax year B a partner need not be obligated to restore a negative capital account balance C capital accounts must be maintained on a book basis D liquidation proceeds must be paid in accordance with positive and negative capital account balance In order to meet the economic effect of safe harbors of section 704(b) regulations which of the following statements is the most true? A a negative capital account must be restored by the end of the tax year B a partner need not be obligated to restore a negative capital account balance C capital accounts must be maintained on a book basis D liquidation proceeds must be paid in accordance with positive and negative capital account balance A a negative capital account must be restored by the end of the tax year B a partner need not be obligated to restore a negative capital account balance C capital accounts must be maintained on a book basis D liquidation proceeds must be paid in accordance with positive and negative capital account balance

Explanation / Answer

the correct answer is option C i.e., capital accounts must be maintained on a book basis.

Option A is partially correct bacause it can be also restored in 90 days after date of liquidation.

So the corret option is C.

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