The ABC Partnership owns the following assets on December 31. $$\begin{array} { | l | r | r | }
\hline & { \text { Basis } } & { \text { FMV } } \
\hline \text { Cash } & \$ 20,000 & \$ 20,000 \
\hline \text { Unrealized receivables } & 0 & 40,000 \
\hline \text { Inventory } & \$ 20,000 & 30,000 \
\hline \text { Land (Sec. } 1231 \text { asset) } & 50,000 & 90,000 \
\hline
\end{array}$$ The indication that ABC owns substantially appreciated inventory is

Question

The ABC Partnership owns the following assets on December 31. $$\begin{array} { | l | r | r | } 
\hline &  { \text { Basis } } &  { \text { FMV } } \
\hline \text { Cash } & \$ 20,000 & \$ 20,000 \
\hline \text { Unrealized receivables } & 0 & 40,000 \
\hline \text { Inventory } & \$ 20,000 & 30,000 \
\hline \text { Land (Sec. } 1231 \text { asset) } & 50,000 & 90,000 \
\hline
\end{array}$$ The indication that ABC owns substantially appreciated inventory is

Quizplus · Accepted Answer

Substantially appreciated inventory is indicated when the FMV of inventory and unrealized receivables exceeds their adjusted bases by more than 120%. Here, the FMV is $70,000 and the basis is $20,000, which is more than 120% of the basis.

The ABC Partnership Owns the Following Assets on December 31