The XYZ Partnership owns the following assets on December 31:

By how much must XYZ reduce its unrealized receivables to avoid meeting the substantially appreciated inventory test?

Question

The XYZ Partnership owns the following assets on December 31:

By how much must XYZ reduce its unrealized receivables to avoid meeting the substantially appreciated inventory test?

Quizplus · Accepted Answer

To avoid meeting the substantially appreciated inventory test, XYZ Partnership must reduce its unrealized receivables by the difference between the fair market value of the inventory ($90,000) and its tax basis ($76,000), which is $14,000. Therefore, the correct answer is B) $14,000.

The XYZ Partnership Owns the Following Assets on December 31