A Partnership May Make an Optional Election to Adjust the Basis

question 7

Multiple Choice

A partnership may make an optional election to adjust the basis of its property on a distribution to a partner which liquidates the partner's entire interest in the partnership. If such an election is in effect, the partnership:

• A) Generally applies the election to transfers that take place at any later date, unless the election is revoked.
• B) Only adjusts the basis of its property for differences in basis between that of the partnership and a distributee partner if a transferor-transferee situation arises within two years after the distribution.
• C) Increases the basis of similar retained assets when a distributee partner takes a basis which is greater than the partnership's basis in these assets, assuming the partnership does not have any receivables or inventory.
• D) Decreases the basis of similar retained assets when a distributee partner takes a basis for the distributed assets which is less than the partnership's basis in these assets.
• E) All of the above.