Question

Which of the following are recognized by the partner on the contribution of property to a partnership by a partner?

a built-in losses
b both built-in gains and losses
c neither built-in gains nor losses
d built-in gains

Answer 1

The correct answer is 'both built-in gains and losses' because the partnership must recognize these if the contributed property is later sold.

Step-by-step explanation:

When a partner contributes property to a partnership, the partnership must recognize any built-in gains or built-in losses if the property is eventually sold by the partnership.

This means if the property's fair market value at the time of contribution differs from the partner's adjusted basis for tax purposes, there are built-in gains or losses that the partnership must acknowledge.

Therefore, the correct answer to the question is 'b both built-in gains and losses'.

The correct answer is 'both built-in gains and losses' because the partnership must recognize these if the contributed property is later sold.

This means if the property's fair market value at the time of contribution differs from the partner's adjusted basis for tax purposes, there are built-in gains or losses that the partnership must acknowledge. Therefore, the correct answer to the question is 'b both built-in gains and losses'.