When property is contributed to a partnership in exchange for a capital and profits interest, when does the partner's holding period begin for the partnership interest?
A) The day after the contribution date.
B) The day the property was contributed.
C) The day the contributed property was purchased.
D) The day the partnership interest was acquired.
E) Either (or both) c. and d. may be true, depending upon the types of property contributed.

Question

Quizplus · Accepted Answer

The holding period for the partnership interest depends on the type of property contributed. If the property is a capital asset or a Section 1231 asset, the holding period includes the period the partner held the property before contributing it. If the property is an ordinary income asset, the holding period begins the day after the contribution.

When Property Is Contributed to a Partnership in Exchange for a Capital