When must a partnership make mandatory basis adjustments?
A)on any sale of a 20% or greater partnership interest
B)on any sale of a partnership interest for $250,000 or more
C)on any distribution of assets with a value of $250,000 or more
D)on any sale of a partnership interest where the partnership's adjusted basis in its assets exceeds their fair market value by $250,000 or more

Question

Quizplus · Accepted Answer

Mandatory basis adjustments are required when there is a substantial value shift in the partnership’s assets. This occurs when the partnership's adjusted basis in its assets exceeds their fair market value by $250,000 or more. Therefore, option D is the correct choice. Options A and B are incorrect because the sale of a partnership interest does not necessarily trigger mandatory basis adjustments unless there is a substantial value shift. Option C is also incorrect because the distribution of assets does not always result in a substantial value shift that triggers mandatory basis adjustments.

When Must a Partnership Make Mandatory Basis Adjustments