Kathy Purchases a One-Third Interest in the KDP Partnership from Paul

question 34

Multiple Choice

Kathy purchases a one-third interest in the KDP Partnership from Paul for $60,000.Just prior to the sale, Paul's outside and inside bases in KDP are $48,000.KDP's balance sheet includes the following: $\begin{array}{llll} & \text { Assets:} & \text { Basis } & \text { FMV } \\ \text {Cash } &&\$48,000&\$48,000\\ \text { Larnd held for irvestrnert } &&96,000&132,000\\\end{array}$


$\begin{array}{llll} & \text { Liabilities ard Capital: } & \\ \text { Capital } & &\text { Paul }&48,000\\ &&\text {Kristi } &48,000\\&& \text { David } &48,000\\\end{array}$
If KDP has a §754 election in place, what is Kathy's special basis adjustment?

• A)$0.
• B)$36,000.
• C)$12,000.
• D)None of the choices are correct.

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Definitions:

Inventory Turnover

A measure of how many times a company's inventory is sold and replaced over a specific period, indicating the efficiency of inventory management.

Receivables Turnover

A financial metric that measures how efficiently a company collects cash from its credit sales by calculating the number of times receivables are turned over during a period.

Payables Turnover

A financial ratio that measures how fast a company pays its suppliers, calculated as the cost of sales divided by average accounts payable.

Cash Cycle

The duration of time it takes for a business to convert its investments in inventory and other resources into cash flows from sales.