Question

An existing partner wants to contribute property having a basis less than its FMV for an additional interest in a partnership. a. Should he contribute the property to the partnership

Answer 1

He should not contribute the property to the partnership.

Step-by-step explanation:

There is an ensuing loss if the partner contributes the property to the partnership instead of a gain. Partnerships recognize the basis of contributed capital. They usually compare the fair market value with the book value to determine if a loss has been incurred or a gain made. However, the tax consequences of the contributed property will be allocated to the partner making the property contribution.