Question

Billy contributes equipment used in a trade or business that he has held for more than 1 year to a partnership in exchange for a partnership interest. What is Billy's holding period immediately after the transfer and one year plus one day later?

a Long-term immediately and long term after the year
b Short-term immediately and short-term after the year
c Short-term immediately and long term after the year

Answer 1

Billy's holding period for the partnership interest received in exchange for equipment is considered long-term immediately after the exchange and remains long-term one year later.

Step-by-step explanation:

When Billy contributes equipment used in a trade or business that he has held for more than 1 year to a partnership in exchange for a partnership interest, the holding period for the contributed assets in the hands of the partnership begins on the date the assets were originally acquired by Billy.

Therefore, Billy's holding period for his partnership interest attributable to the contributed equipment would be considered long-term immediately after the transfer.

This means the answer is that Billy's holding period is long-term immediately after the transfer and would remain long-term one year plus one day later.

Billy's holding period for the partnership interest received in exchange for equipment is considered long-term immediately after the exchange and remains long-term one year later.