Which of the Following Statements Is True Regarding the Sale

question 45

Multiple Choice

Which of the following statements is true regarding the sale of a partnership interest?

• A)The selling partner's share of partnership liabilities is disregarded in determining the proceeds from the sale of a partnership interest.
• B)For purposes of computing the selling partner's gain or loss, the partner's basis in the partnership interest is determined as of the last day of the partnership tax year ending before the year in which the interest is sold.
• C)If a partner sells an interest in a partnership, income related to that interest for the year of the sale is allocated to the purchaser.
• D)The selling partner could be required to report both ordinary income and a capital loss on sale of the partnership interest.
• E)The partner's share of partnership "hot assets" is disregarded in determining the character of the partner's gain on the sale of the partnership interest.

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Definitions:

Income or Loss

Income or loss refers to the financial result of a company’s operations over a specific period, indicating profitability or deficit.

Adjusted Balances

Balances that have been modified to reflect corrections or adjustments to initial reported amounts, often in the context of bank accounts or financial statements.

Closing Accounts

The process of zeroing out income and expense accounts to transfer their balances to permanent accounts at the end of an accounting period.

Ledger

A book or collection of financial accounts where all transactions are summarized and recorded using a double-entry bookkeeping system.