In short
If property a partner contributed with a built-in gain is distributed to another partner within 7 years, the contributing partner recognizes the precontribution gain. If the contributing partner receives other property within 7 years, they may also recognize gain.
Key takeaways
- The rules stop partnerships being used to swap appreciated property tax-free.
- They work with the rules for allocating built-in gain on contributed property.
- Distributing the contributed property back to its contributor doesn't trigger them.
Where it's tested
TCP: Partnership Compliance & Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A partner contributes land with a basis of $40,000 and a fair market value of $100,000. Three years later the partnership sells the land for $110,000. How is the gain allocated?