A Partnership May Make an Optional Election to Adjust the Basis

question 64

Multiple Choice

A partnership may make an optional election to adjust the basis of its property under § 754. If such an election is in effect, the partnership:

• A) Generally applies the election to transfers that take place at any later date unless the election is revoked.
• B) Only adjusts the basis of its property for differences in basis between that of the partnership and a distributee partner if a transferor-transferee situation arises within two years after the distribution.
• C) Increases the basis of similar retained assets when a distributee partner takes a basis that is greater than the partnership's basis in these assets, assuming the partnership does not have any receivables or inventory.
• D) Decreases the basis of similar retained assets when the distributee partner recognizes gain on the distribution.
• E) Decreases the basis of hot assets when a distributee partner recognizes a loss on a current nonliquidating) distribution.

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