Question

Which of the following is false concerning special basis adjustments under Section 754? Multiple Choice Special basis adjustments are intended to eliminate discrepancies between inside and outside bases. Special basis adjustments are an annual election made by the partnership. Special basis adjustments can occur when a new investor purchases a partnership interest.

Answer 1

Answer:

Special basis adjustments are an annual election made by the partnership.

Explanation:

According to section 754, the election option is available when some prescribed types of distribution of assets from the partnership to a partner occur if transfer of interest by either of sale, exchange or death of partner ocurred, otherwise such section will not be applicable. Once such section applied it will continue to be applied to all tranfers.