Which of the Following Statements Regarding the Section 754 Adjustment

question 132

Multiple Choice

Which of the following statements regarding the Section 754 adjustment is incorrect?

• A)Sec.754 permits a basis adjustment to partnership assets upon the sale of a partnership interest.
• B)Sec.754 permits a basis adjustment to partnership assets upon certain distributions.
• C)The Sec.754 election is made annually by the partnership.
• D)The Sec.754 election is intended to prevent inequities that may occur when the bases of partnership assets are not adjusted.

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Definitions:

Subsidiary

A company that is completely or partially owned and wholly controlled by another company, referred to as the parent company.

Voting Stock

Shares that give the shareholder a right to vote on company matters, such as electing the board of directors.

Control

The power to direct the financial and operating policies of a business with a view to gain economic benefits from its activities.

Accounting for Business Combinations

The process of accounting for the acquisition of one company by another and combining the financial statements.