Which of the Following Statements Regarding Liquidating Distributions Is True

question 59

Multiple Choice

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.

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Definitions:

First-In, First-Out Method

An inventory valuation method where the cost of the earliest goods purchased is the first to be recognized in determining cost of goods sold.

Equivalent Units

A concept used in process costing that converts partially completed units into a number of fully equivalent units for the purposes of accounting.

Direct Materials

Materials that can be directly linked to the production process of a product and are essential components of the final product.

First-In, First-Out Method

An inventory valuation method where the first items acquired are assumed to be sold first, affecting the cost of goods sold and ending inventory valuation.