If the Partnership Has Hot Assets at the Time a Partnership

question 25

True/False

If the partnership has hot assets at the time a partnership interest is sold, the selling partner must allocate a portion of the sale proceeds to these assets and recognize ordinary income (loss).

---

Definitions:

Cost of Acquisition

The total of all expenses incurred to acquire an asset or business, including the purchase price and related costs.

Impairment Loss

The reduction in the recoverable value of an asset or cash-generating unit below its carrying value.

Pre-Acquisition Profits

Earnings of a subsidiary before control was taken by the parent company; these are not included in the consolidated profit and loss of the parent company.