A pre-contribution gain occurs when a partner contributes appreciated property to a partnership and,within seven years,the partnership distributes the same property to another partner.

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This is true. When a partner contributes appreciated property to a partnership and the partnership distributes the same property to another partner within seven years, a pre-contribution gain occurs. This gain is the difference between the fair market value of the property at the time of distribution and its adjusted basis on the date of contribution to the partnership. The partner who receives the distributed property will also assume the pre-contribution gain.

A Pre-Contribution Gain Occurs When a Partner Contributes Appreciated Property