Which of the following statements is true regarding partnership operating distributions?
A)If a partner's outside basis is greater than the bases of the assets distributed in an operating distribution, the partner will recognize a loss.
B)If a partner's outside basis is less than the bases of the assets distributed in an operating distribution, the partner will recognize a loss.
C)If a partner's outside basis is greater than the bases of the assets distributed in an operating distribution, the partner will recognize a gain.
D)None of the statements are true.

Question

Quizplus · Accepted Answer

In partnership tax law, operating distributions generally do not trigger a gain or loss recognition event for the partner receiving the distribution, regardless of whether the partner's outside basis is greater or less than the bases of the assets distributed. The partner's outside basis is adjusted, but gain or loss is not recognized at the time of the distribution.

Which of the Following Statements Is True Regarding Partnership Operating