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

Question

Quizplus · Accepted Answer

When a partner contributes an asset to a partnership as capital under § 721(a), the partnership takes a carryover basis in the contributed asset. Option A is incorrect because a like-kind exchange would result in a new basis for the partnership in the new like-kind property. Option B is incorrect because the sale of an asset by a partner to the partnership would not result in a carryover basis for the partnership. Option C is incorrect because a lease does not involve the transfer of ownership or the acquisition of the asset.

A Partnership Will Take a Carryover Basis in an Asset