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    Character of taxable gain for inventory distributed to Terry

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    True/False

    8. Terry received a proportionate share of partnership inventory in complete liquidation of her partnership interest. If Terry holds the distributed property as a capital asset for six years and sells it for a gain, the gain is taxed as a long-term capital gain.

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    That is true because in her hands, it is no longer inventory. Code Section 735 (a) (2) specifies that inventory held over five years in ...

    Solution Summary

    The solution clearly explains the theory and references a tax code with respect to Terry's transaction with partnership inventory.

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