A Retiring Partner Who Receives a Liquidating Distribution of Cash

question 18

True/False

A retiring partner who receives a liquidating distribution of cash as payment for her share of partnership substantially appreciated inventory must recognize ordinary income equal to the excess of the FMV of her proportionate share of the inventory over her proportionate share of the inside basis of the inventory.

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Definitions:

Treasury Bill

A short-term government security issued at a discount from the face value and pays no interest before maturing at its face value.

Effective Annual Rate

The interest rate on a loan or investment, adjusted for the effect of compounding over a one-year period.

Par

The face value of a bond or other financial instrument, which is the amount to be paid to the holder at maturity.

HPR

Holding Period Return, a measure of the total return received from holding an asset or portfolio of assets over a specified period of time.