The ABC Partnership Makes a Proportionate Distribution of Its Assets

question 63

Multiple Choice

The ABC Partnership makes a proportionate distribution of its assets to Charles,in complete liquidation of his partnership interest.The distribution consists of $30,000 in cash and capital assets with a basis to the partnership of $20,000 and a fair market value of $28,000.None of the payment is for partnership goodwill.At the time of the distribution,Charles's partnership basis is $42,000 and the partnership has no liabilities and no "hot assets." If the partnership makes an optional basis adjustment election on a timely filed return,it recognizes:

• A)Capital gain of $16,000 and increases the basis of its remaining assets by $8,000.
• B)Capital loss of $8,000 and decreases the basis of its remaining assets by $16,000.
• C)No gain or loss and increases the basis of its remaining assets by $8,000.
• D)No gain or loss and decreases the basis of its remaining assets by $16,000.
• E)None of the above.

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Definitions:

Nonresponse Error

An error that occurs in survey research when some participants do not respond, potentially biasing the results.

Survey

A method for collecting information and data about a population by asking questions to a sample of that population to extrapolate insights or conclusions about the whole.

Cluster Samples

A sampling technique where the population is divided into groups (clusters) and a random sample of these clusters is selected to represent the whole population.

Sampling Error

Sampling error describes the difference between a sample statistic used to estimate a population parameter and the actual but unknown value of the parameter.