When Must a Partnership Make Mandatory Basis Adjustments

question 29

Multiple Choice

When must a partnership make mandatory basis adjustments?

• A)on any sale of a 20% or greater partnership interest
• B)on any sale of a partnership interest for $250,000 or more
• C)on any distribution of assets with a value of $250,000 or more
• D)on any sale of a partnership interest where the partnership's adjusted basis in its assets exceeds their fair market value by $250,000 or more

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Definitions:

Cash Inflows

Money or funds entering a business from various sources like sales, investments, or financing.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of shareholder wealth maximization, such as purchasing equipment or acquiring another business.

Discounted Cash Flow

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted for the time value of money.

Payback Method

A capital budgeting technique that calculates the time required to recoup the cost of an investment, focusing on cash flows rather than profitability.