Which of the following statements is true regarding the sale of a partnership interest?
A) The selling partner's share of partnership liabilities is disregarded in determining the proceeds from the sale of a partnership interest.
B) For purposes of computing the selling partner's gain or loss, the partner's basis in the partnership interest is determined as of the last day of the partnership tax year ending before the year in which the interest is sold.
C) If a partner sells an interest in a partnership, income related to that interest for the year of the sale is allocated to the purchaser.
D) The selling partner could be required to report both ordinary income and a capital gain or loss on sale of the partnership interest.
E) The partner's share of partnership "hot assets" is disregarded in determining the character of the partner's gain on the sale of the partnership interest.

Question

Quizplus · Accepted Answer

The selling partner could be required to report both ordinary income and a capital gain or loss on the sale of a partnership interest. This is because the sale may involve both "hot assets" (which can generate ordinary income) and other assets, leading to capital gains or losses.

Which of the Following Statements Is True Regarding the Sale