Final answer:
The false statement regarding the sale of a partnership interest is that hot assets change the character of a gain on the sale from ordinary income to capital gain, whereas they actually do the opposite. The correct answer is option a.
Step-by-step explanation:
The statement that is false regarding the sale of a partnership interest is: a. Hot assets change the character of a gain on the sale from ordinary income to capital gain. In fact, "hot assets" such as accounts receivable or inventory can change the character of the gain from capital gain to ordinary income for tax purposes. Hot assets are items that can generate income which is taxed at different rates than capital gains. When a partner sells a partnership interest, these hot assets can cause part of the gain to be treated as ordinary income.
Concerning the other statements in the question: b. Any debt relief increases the amount the partner realizes from the sale is true because when a partner's share of partnership debt is reduced or taken over by other partners, this is considered part of the amount realized from the sale. c. The seller's primary tax concern in a partnership interest sale is indeed calculating the amount and character of gain or loss on the sale, as this determines the tax implications of the transaction. Lastly, d. The selling partner determines the gain or loss as the difference between the amount realized (including any relief of debt) and their outside basis in the partnership is also true, as this is the basic principle for determining gain or loss in such sales.