A partnership will take a carryover basis in an asset it acquires when:
A) The partnership acquires the asset through a § 1031 like-kind exchange.
B) A partner owning 25% of partnership capital and profits sells the asset to the partnership.
C) The partnership leases the asset from a partner on a one-year lease.
D) The partnership acquires the asset from a partner as a contribution to partnership capital under § 721(a).
E) None of the above? the partnership always takes a substituted basis in the assets it receives.

Question

Quizplus · Accepted Answer

According to § 723, when a partner contributes property to a partnership, the partnership's basis in the contributed property is the same as the contributor's adjusted basis at the time of contribution. Therefore, if the partnership acquires the asset from a partner as a contribution to partnership capital under § 721(a), the partnership will take a carryover basis in that asset.

A Partnership Will Take a Carryover Basis in an Asset