Question

Which of the following statements is always correct regarding assets acquired by a newly-formed partnership? If a partner contributes:

a.         Equipment that is depreciable trade or business property (in the partner’s hands): the partnership treats the property as new property, and may claim a § 179 deduction.

b.         Unrealized (in the cash-basis partner’s hands) receivables: the partnership will report ordinary income when the receivable is collected.

c.         Inventory (in the partner’s hands): the partnership reports ordinary income whenever the property is sold, even if the property is an IRC § 1231 asset of the partnership.

d.         Depreciable equipment used by the partnership in its business: gain or loss on the sale of the property receives IRC Section 1231 treatment.

e.         (b) and (c) are both correct.

Answer 1