Ken and Lars formed the equal KL Partnership during the current year; Ken contributes $100,000 in cash and Lars contributes land (basis of $60,000, fair market value of $40,000) and equipment (basis of $0, fair market value of
$60,000). Lars recognizes a $40,000 gain on the contribution and his basis in his partnership interest is $100,000.

Question

Quizplus · Accepted Answer

Lars does not recognize any gain on the contribution of property to the partnership. Under U.S. tax law, no gain or loss is recognized by a partner when contributing property to a partnership in exchange for an interest in the partnership. Lars's basis in his partnership interest would generally be his adjusted basis in the land ($60,000) plus his basis in the equipment ($0), totaling $60,000, not $100,000, unless there are other adjustments or considerations not mentioned in the scenario.

Ken and Lars Formed the Equal KL Partnership During the Current