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 acquires the asset from a partner as a contribution to partnership capital under § 721(a).
D)The partnership leases the asset from a partner on a one-year lease.
E)None of the above.

Question

Quizplus · Accepted Answer

According to § 721(a), when a partner contributes property to a partnership in exchange for a partnership interest, the partnership takes a carryover basis in the contributed property. Therefore, when the partnership acquires the asset from a partner as a contribution to partnership capital under § 721(a), it will take a carryover basis in the asset. This is different from the other choices as they do not involve a contribution of property to the partnership.

A Partnership Will Take a Carryover Basis in an Asset