Identify which of the following statements is true.
A)A partner's relief of debt is treated as if the partner receives a cash distribution.
B)When a partnership assumes any liabilities of the transferor, the transferor has an increase in the basis of his or her partnership interest.
C)Gain recognized by a contributing partner because of the assumption of liabilities by the partnership increases the partnership's basis in the contributed property.
D)All of the above are false.

Question

Quizplus · Accepted Answer

A partner's relief of debt is indeed treated as if the partner receives a cash distribution. This is because the reduction in personal liability is considered to provide the partner with an economic benefit, similar to receiving a cash distribution from the partnership.

Identify Which of the Following Statements Is True