CPA · Question 38 · Area II: Entity Tax Compliance
A partnership has a §754 election in effect. Partner A sells their interest to Partner B. The partnership's assets have a basis of $100,000 and FMV of $80,000 (Built-in Loss of $20,000). Partner B pays $80,000 for the interest (assume 100% ownership for simplicity of math). What is the impact of the §743(b) adjustment?
Answer options:
No adjustment is made for built-in losses.
Partner B gets a $20,000 downward basis adjustment.
The partnership reduces its common basis in the assets by $20,000.
Partner B recognizes a $20,000 loss immediately.
68 questions · hints · full answers · grading
Expert