James received a distribution of $110,000 cash in liquidation of his 25% managing (general partner) interest in the JKL LLP. JKL is a service-oriented entity. Before the distribution, the LLPs assets consisted of $200,000 cash, land (basis of $40,000, value of $100,000), unrealized receivables (basis of $0, value of $100,000), and goodwill (basis of $0, value of $40,000). James negotiated the $10,000 portion of the payment that is for goodwill; the partnership agreement does not address payments to retiring partners for goodwill. James will recognize $35,000 of ordinary income from his 736(a) payment; the remaining $75,000 distribution is treated as a 736(b) property payment for his partnership interest.

True

False