Question

Question-2

Susan is a Partner in a business which publishes college textbooks. When would Susan recognize gain on a partnership distribution?

A. In a liquidating distribution when the fair market value of the property received exceeds partnership interest basis.

B. In a nonliquidating distribution and the cash received exceeds the basis of the partnership interest.

C. In a nonliquidating distribution and the property received exceeds the fair market value of the partnership interest.

D. Gain is not recognized until the property received for the partnership interest is sold.

Answer 1

Solution:-

Susan is a Partner in a business which publishes college textbooks. When would Susan recognize gain on a partnership distribution:-

D. Gain is not recognized until the property received for the partnership interest is sold.

Explanation:-

A partner generally recognizes gain on a partnership distribution only to the extent any money (and marketable securities treated as money) included in the distribution exceeds the adjusted basis of the partner's interest in the partnership. Any gain recognized is generally treated as capital gain from the sale of the partnership interest on the date of the distribution. If partnership property (other than marketable securities treated as money) is distributed to a partner, he or she generally doesn't recognize any gain until the sale or other disposition of the property.

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