Question

True or False: A partner contributes property used in a trade or business to a partnership in return for a partnership interest. The partner held the property for 2 years prior to contribution. The partner then sells his partnership interest three weeks later. The contributing partner will realize a short-term capital gain/loss on the sale of his partnership interest.

Answer 1

TRUE

explanation:

As is the case on any asset's sale, the amount of the transferor-partner's gain or loss on the transfer of a partnership interest is determined

Gain or loss realized is, accordingly, the amount realized by the transferor-partner for the transfer of his partnership interest which is in excess of, or less than, his adjusted basis in his partnership interest

In keeping with the entity approach to the taxation of transfers of partnership interests, this gain or loss is considered to be gain or loss from the sale or exchange of a capital asset, except as otherwise provided (which relates to unrealized receivables and inventory).