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 these; the partnership always takes a substituted basis in the assets it receives.

Question

Quizplus · Accepted Answer

Under § 721(a) of the Internal Revenue Code, when a partner contributes property to a partnership in exchange for an interest in the partnership, the partnership takes a carryover basis in the contributed property. This means the partnership's basis in the property is the same as the contributing partner's basis immediately before the contribution.

A Partnership Will Take a Carryover Basis in an Asset