Asked by Isaac Rojas on Jul 02, 2024
Verified
On April 30 of the current year,Ashley contributes a building with a $155,000 basis and a $235,000 FMV in exchange for a partnership interest.She purchased the building eight years ago.
a.What is Ashley's basis in her partnership interest?
b.What is Ashley's holding period of her partnership interest?
c.What is the basis of the building in the hands of the partnership?
d.What is the holding period of the building in the hands of the partnership?
e.How will the partnership depreciate the building in the year of contribution?
Partnership Interest
An ownership share in a partnership that represents a portion of the entity's assets and income.
Depreciate
To reduce the recorded value of an asset in financial accounts over its useful life to reflect wear and tear, obsolescence, or decline in value.
Holding Period
The length of time an investment is held before being sold, which can affect the capital gains tax owed upon sale.
- Acquire an understanding of the steps and impacts involved in the formation of a partnership, with a focus on the aspects of contributions and disbursements.
- Learn the process of determining partnership basis and its essential role in tax considerations.
- Recognize the impact of asset contribution to a partnership on partners' basis and partnership's basis.
Verified Answer
b.The partnership interest has an eight-year holding period - the same as the building in the hands of the partner.
c.$155,000 - carryover basis.
d.8 years - the same as in the hands of the partner.
e.The partnership steps into the shoes of the partner - 8th year of the depreciation life.
Learning Objectives
- Acquire an understanding of the steps and impacts involved in the formation of a partnership, with a focus on the aspects of contributions and disbursements.
- Learn the process of determining partnership basis and its essential role in tax considerations.
- Recognize the impact of asset contribution to a partnership on partners' basis and partnership's basis.
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