Which of the following statements regarding capital and profits interests received for services contributed to a partnership is false?
A)The holding period of a capital or profits interest begins on the date the interest is received.
B)Partners receiving capital interests must recognize the liquidation value of their capital interests as capital gain.
C)Partners receiving only profits interests generally don't recognize income when the profits interest is received.
D)Partners receiving only profits interests include their share of partnership debt in the tax basis of their partnership interest.

Question

Quizplus · Accepted Answer

Partners receiving capital interests recognize capital gain or loss upon their disposition, but not upon receipt. The holding period for a capital or profits interest is determined from the date the interest is received. Partners receiving only profits interests generally include their share of partnership debt in their tax basis, but they do recognize income upon receipt based on the value of the interest received.

Which of the Following Statements Regarding Capital and Profits Interests