Question

Which of the following statements is true when property is contributed in exchange for a partnership interest?

a. The holding period for a partner's partnership interest depends upon the type of assets a partner contributes.

b. Any contributed property in a partnership has a carryover basis, and the character of the property is determined by the way the contributing partner used the property.

c. Services are not allowed to be contributed to a partnership in return for a partnership interest.

d. The partnership's inside basis is typically increased by any gain the partner recognizes from the property contribution.

e. All of the choices are true.

Answer 1

The correct statement is that any contributed property in a partnership has a carryover basis, and the character of the property is determined by the way the contributing partner used the property.

Step-by-step explanation:

The correct statement when property is contributed in exchange for a partnership interest is option b. When property is contributed, it has a carryover basis, meaning that the property retains the same basis it had in the hands of the contributing partner.

The character of the property is determined by the way the contributing partner used the property. For example, if the contributing partner used the property for business purposes, then it will have a business character in the partnership.