Identify which of the following statements is true. A) A contribution of services for a partnership...
Identify which of the following statements is true.
A) A contribution of services for a partnership interest is a tax-free transaction.
B) For Federal income tax purposes, formation of a partnership is governed by Sec. 721.
C) When a partnership assumes a liability on property contributed by a partner, the only effect on the contributing partner's basis in his or her partnership interest is that his or her basis will be increased by the amount of the liability assumed by the other partners.
D) All are false.
Homework Answers
B) For federal income tax purposes, formation of a partnership is governed by Sec. 721
Considering all the option, option B is correct i.e. For federal income tax purposes, formation of a partnership is governed by Sec. 721 and others are wrong.
Option A is wrong
As a general rule, a contribution of services in exchange for a partnership interest will not qualify for tax-free treatment.
Option C is wrong
Partner’s share of liabilities increases their outside basis in the partnership.
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