Basis in a partnership: contribution of property
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A taxpayer contributes property with an adjusted basis of $125,000 and a fair market value of $155,000 to her business entity. If the entity is a partnership and the transaction qualifies under § 721, the partnership's basis for the asset and the partner's basis for her partnership interest are:
Asset Basis Interest Basis
a. $125,000 $155,000
b. $155,000 $125,000
c. $125,000 $125,000
d. $155,000 $155,000
e. None of the above.
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Solution Summary
The solution explains the tax treatment of a transaction in which property, rather than cash, is contributed to a partnership. An IRS regulation is cited to confirm the response. The property further discusses the tax implications to the individual.
Solution Preview
Basis for the asset and basis in the partnership interest will be the same. Section 721 says "No gain or loss shall be recognized to a partnership or to any of its partners in the ...
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