Partner Tom Transferred Property (Basis of $20,000; Fair Market Value

question 52

Multiple Choice

Partner Tom transferred property (basis of $20,000; fair market value of $50,000) to the TUV Partnership in exchange for a partnership interest. At a later date, when Tom's outside basis for his partnership interest was $70,000, Tom received a $50,000 cash distribution from the partnership. Which one of the following statements is not true?

• A) If the cash distribution occurred two months after the property contribution, the IRS may treat the transaction as a disguised sale.
• B) If the transaction is treated as a disguised sale, Tom's basis in the partnership interest will be $20,000.
• C) If Tom would have made the property contribution anyway, even if he knew that the partnership would probably not have any cash to distribute to him, the IRS would not likely contend the transaction was a disguised sale.
• D) If the IRS treated the transaction as a disguised sale, the partnership's basis in the property would be $50,000.

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Definitions:

Painting

The practice of applying pigment, color, or other medium to a surface with various tools, such as brushes, knives, or sponges, to create artistic expressions.

Dutch Trade

Refers to the extensive trading networks and practices of the Dutch, especially during the 17th century, which included the spice trade, slave trade, and the establishment of colonies.

High Tariffs

Government-imposed taxes on imported or, in some cases, exported goods designed to protect domestic industries from foreign competition or to generate revenue.

Dutch Republic

A historical state in Europe from the late 16th to the 18th centuries, known for its republican form of government, commercial prosperity, and contributions to the arts and sciences.