Several years ago, the Jaymo Partnership purchased 2,000 shares of ABCO stock (publicly traded) for $40,000; the stock now has a fair market value of $90,000 . If this stock is distributed to Jason in liquidation of his 30% partnership interest, it is treated as a cash distribution of $75,000 and a property distribution of $15,000 . Assume Jaymo owns no other securities
a. True
b. False
Indicate whether the statement is true or false
True
RATIONALE: The appreciation in the stock allocable to Jason's ownership interest is treated as a property distribution rather than a cash distribution. Jason's share of the appreciation in the stock before the distribution was $15,000 [30% × ($90,000 – $40,000)]. Jason's deemed cash distribution is $75,000 ($90,000 – $15,000) and his property distribution is $15,000.
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