A partnership sells an asset for a gain.The asset had been transferred to the partnership two years ago by Partner J in exchange for a partnership interest.The asset was worth substantially more than its cost as of the transfer date.The partnership gain will be allocated to all of the partners in accordance with their profit and loss sharing ratios.

Question

Quizplus · Accepted Answer

The gain from the sale of the asset will be allocated to Partner J to the extent of the built-in gain at the time of the transfer, due to the "built-in gain" rules, before being shared according to profit and loss ratios.

A Partnership Sells an Asset for a Gain