A taxpayer who exchanges property for an interest in a partnership never recognizes gain or loss on the exchange.

Question

Quizplus · Accepted Answer

This is true according to IRS tax code section 721, which allows for the tax-free exchange of property for an interest in a partnership. The taxpayer's basis in the partnership interest will be equal to the adjusted basis of the property exchanged. Gain or loss will only be recognized when the taxpayer sells or disposes of the partnership interest.

A Taxpayer Who Exchanges Property for an Interest in a Partnership