Which of the following statements regarding capital and profit interests received for services contributed to a partnership is false?
A)The holding period of a capital or profits interest begins on the date the interest is received.
B)Partners receiving capital interests must recognize the liquidation value of their capital interests as capital gain.
C)Partners receiving only profits interests generally don't recognize income when the profits interest is received.
D)Partners receiving only profits interests include their share of partnership debt in the tax basis of their partnership interest.

Question

Quizplus · Accepted Answer

Partners receiving capital interests must recognize the fair market value of their capital interests as income, not the liquidation value. The holding period of a capital or profits interest begins on the date the interest is received, and partners receiving only profits interests generally don't recognize income when the profits interest is received. Partners receiving only profits interests do include their share of partnership debt in the tax basis of their partnership interest.

Which of the Following Statements Regarding Capital and Profit Interests