Question

The AC Partnership has two partners - Amanda and Cheryl. Each partner has a 50% interest in the partnership. Amanda also owns 80% (80 shares) of the ZZZ Corporation. The other 20% of ZZZ are owned by Wendy who is not related to Amanda or Cheryl. Based on these facts, the AC partnership will be deemed to own ______ shares of ZZZ and Cheryl will be deemed to own _____ shares of ZZZ.

a. 80 shares, 80 shares

b. 20 shares, 20 shares.

c. 80 shares, 20 shares.

d. 80 shares, zero shares.

e. none of the above.

Answer 1

As per the demand of the question .....

given :- partnership firm name :- AC PARTNERSHIP.

PARTNER NAMES (1) AMANDA ; (2) CHERYL . with equal interest.

Amanda, one of the partners of AC PARTNERSHIP FIRM owns 80% (80) in ZZZ CORPORATION. Rest of the shares in ZZZ CORP were held by WENDY who is not related to either of the partners.

legal status of partnership firm :-

in US , each state has its own laws governing partnership. There is no single FEDERAL LAW exclusively dealing with various forms of partnership. But majority of the states adopted one form or another of "UNIVERSAL PARTNERSHIP ACT which defines partnership as separate legal entity from its partners.

in the given challenge, we can observe that AMANDA bought shares. Assuming that those shares were bought on his personal capacity. so, we cannot say that those shares be deemed to the shares of the firm. i,e in the first blank AC PARTNERSHIP WILL BE DEEMED TO OWN ZERO SHARES OF ZZZ CORP. Similarly as the shares are personally owned by AMANDA, CHERYL own nil number of shares in ZZZ Corp. Basing on the separate legal status of partnership and the assumption as specified above.

note :- Reason for assuming that AMANDA purchased on his own name is partnership firm enjoys separate legal status. So, partners would have bought shares in the name of firm itself rather than partners name.

CONCLUSION :- NONE OF THE ABOVE. KINDLY GO THROUGH THE REST OF THE ANSWER.

Case 2 :- if it is deemed that shares bought be deemed to be the shares of firm then in the first blank 80 shares by AS FIRM. Here one more key point is that shares of firm also be deemed to be shares of partners. Hence Shares owned by AMANDA be deemed to be shares of AC PARTNERSHIP FIRM. Accordingly shares of firm can also be deemed to be the shares of another partner "CHERYL".

CONCLUSION :- AC PARTNERSHIP WILL BE DEEMED TO OWN 80 SHARES OF ZZZ CORP AND CHERYL WILL BE DEEMED TO OWN 80 SHARES OF ZZZ CORPORATION.

HENCE, OPTION - A.