If property contributed to a partnership is subject to a liability (assumed by the partnership), gain is recognized to the contributing partner to the extent of the liability.

Question

Quizplus · Accepted Answer

Gain is not recognized by the contributing partner to the extent of the liability assumed by the partnership; instead, the partner's basis in the partnership interest is reduced by the amount of the liability assumed by the partnership.

If Property Contributed to a Partnership Is Subject to a Liability