Identify which of the following statements is true.
A)When unrealized receivables are distributed in a liquidating distribution, the basis of the receivables will be increased.
B)The bases of unrealized receivables and inventory distributed by a partnership in liquidation of a partnership interest are never increased above their bases in the hands of the partnership.
C)The basis of the partnership interest is apportioned between all of the assets received in a liquidating distribution based on the relative FMVs of the assets.
D)All of the above are false.

Question

Quizplus · Accepted Answer

The basis of unrealized receivables and inventory distributed by a partnership in liquidation of a partnership interest can be increased above their bases in the hands of the partnership, but only to the extent of any gain recognized on the deemed sale of the assets by the partnership. However, the bases of other distributed assets are apportioned based on their relative FMVs. Therefore, statement A is false and statement C is partially true but not comprehensive.

Identify Which of the Following Statements Is True