Which of the Following Statements Regarding the Sale of a Partnership

question 58

Multiple Choice

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

• A)The seller's primary tax concern in a partnership interest sale is calculating the amount and character of gain or loss on the sale.
• B)The selling partner determines the gain or loss as the difference between the amount realized and her outside basis in the partnership.
• C)Hot assets change the character of a gain on the sale from ordinary income to capital gain.
• D)Any debt relief increases the amount the partner realizes from the sale.

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Definitions:

Incremental Cash Flows

The additional cash inflows or outflows expected from taking on a new project or investment, essential for assessing its potential profitability.

Evaluation

The process of determining the significance, worth, or condition of something, typically through careful appraisal and study.

Depreciation Tax Shield

The tax savings achieved by a company from the allowance for depreciation expenses, reducing taxable income.

Depreciable Basis

The initial cost of an asset that can be depreciated over time for tax purposes, minus any salvage value.