On a nonliquidating distribution of cash from a partnership, the partner will recognize gain if
I.the cash distributed exceeds his/her basis in the partnership.
II.the cash distributed exceeds his/her share of the net income of the partnership for the year.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

On a nonliquidating distribution of cash from a partnership, the partner will recognize gain if
I.the cash distributed exceeds his/her basis in the partnership.
II.the cash distributed exceeds his/her share of the net income of the partnership for the year.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

Statement I is correct because if the cash distributed exceeds the partner's basis in the partnership, the excess is considered as gain. However, statement II is incorrect because the partner's share of the net income of the partnership is not a relevant factor in determining gain on a nonliquidating distribution of cash.

On a Nonliquidating Distribution of Cash from a Partnership, the Partner