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Character of taxable gain for inventory distributed to Terry

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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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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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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 ...

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