The XYZ Partnership Owns the Following Assets on December 31

question 20

Multiple Choice

The XYZ Partnership owns the following assets on December 31: $$\begin{array} { | l | r | r | } \hline & { \text { Basis } } & { \text { FMV } } \\\hline \text { Cash } & \$ 20,000 & \$ 20,000 \\\hline \text { Unrealized receivables } & 0 & 15,000 \\\hline \text { Inventory } & \$ 30,000 & 35,000 \\\hline \text { Land (Sec. 1231 asset) } & 40,000 & 70,000 \\\hline\end{array}$$ By how much must XYZ reduce its unrealized receivables to avoid meeting the substantially appreciated inventory test?

• A)$10,000
• B)$14,000
• C)$15,000
• D)No amount of reduction of unrealized receivables will affect meeting the substantially appreciated inventory test.

---

Definitions:

Task Significance

The degree to which a job has a substantial impact on the lives or work of other people, within or outside the organization.

Independence

The state of having the self-autonomy and freedom to make decisions without undue influence from others.

Discretion

The freedom to decide what should be done in a particular situation.

Adam Smith

An 18th-century Scottish economist known as the father of modern economics, renowned for his theories on free markets and the division of labor.