Which of the Following Statements Correctly Reflects One of the Rules

question 67

Multiple Choice

Which of the following statements correctly reflects one of the rules regarding proportionate liquidating distributions?

• A) Relief of liabilities is treated as a distribution of cash but only to the extent that the cash distribution does not exceed the partner's basis in the partnership interest.
• B) A partner's basis in distributed unrealized receivables is the lesser of the partnership's basis in the receivables or their fair market value.
• C) The basis of unrealized receivables cannot be stepped up to their fair market value unless the partner has adequate unabsorbed basis.
• D) Assets are deemed distributed in the following order: cash, unrealized receivables and inventory, and finally, capital assets.
• E) The partner can recognize gain but not loss on a proportionate liquidating distribution.

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