Which of the following statements regarding liquidating distributions is true?
A)A partner will recognize a gain when the partnership distributes only money and the amount is greater than the partner's outside basis.
B)A partner will recognize a gain when the partnership distributes only money and hot assets and the inside bases of the distributed assets are greater than the partner's outside basis.
C)A partner will recognize a gain when the partnership distributes money, hot assets, and other property and the inside bases of the distributed assets are greater than the partner's outside basis.
D)A partner will recognize a gain when the partnership distributes only money and the amount is less than the partner's outside basis.

Question

Quizplus · Accepted Answer

A partner will recognize a gain when the partnership distributes only money and the amount is greater than the partner's outside basis in the partnership. This is because the distribution is considered to be a return on the investment to the extent it exceeds the partner's basis in the partnership.

Which of the Following Statements Regarding Liquidating Distributions Is True