Which of the Following Statements Regarding a Partner's Basis of Inventory

question 8

Multiple Choice

Which of the following statements regarding a partner's basis of inventory received in a liquidating distribution is true?

• A)Partners may either increase or decrease the basis in inventory distributed in a liquidating distribution.
• B)Partners may only increase the basis in inventory distributed in a liquidating distribution.
• C)Partners may only decrease the basis in inventory distributed in a liquidating distribution.
• D)None of these statements is true.

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Definitions:

Preferential Payment

A payment made by a debtor to one creditor over others, typically before a bankruptcy, that can be subject to clawback during bankruptcy proceedings.

Chapter 7 Bankruptcy

A type of bankruptcy that involves the liquidation of assets to repay creditors, used when the individual or business is unable to reorganize debt and lacks the means to pay it off.

Discharged Debts

Debts that have been forgiven or eliminated, usually through bankruptcy proceedings, and are no longer legally enforceable.

Repay

To return money that was borrowed, often including interest in the case of loans or credit.