Formation of Partnerships Overview of Code Section 721 No Gain or Loss

Formation of partnerships overview of code section

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Formation of Partnerships – Overview of Code Section 721 No Gain or Loss: Generally, Code Sec. 721 requires that no gain or loss is recognized if property is transferred to a partnership in exchange for partnership interest. It does not matter whether the transfer is during partnership formation or after the partnership had already been formed. Mandatory non recognition: Notwithstanding the exceptions in the following slide, non- recognition treatment for qualified transactions under Code Sec. 721 is mandatory, not elective for partners. Similarly, non-recognition treatment under Code Sec. 351 is mandatory for corporate shareholders.
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Inside and Outside Basis Inside Basis: This is the partnership’s basis in the partnerships assets. Each partner will have a share of the inside basis equal to his ownership interest. The inside basis is important to determine gain/loss upon the disposition of partnership’s assets. Outside Basis: This is the partner’s basis in the partnership interest. The outside basis is important to determine gain/loss upon disposition of the partner’s interest in a partnership.
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  • Fall '14
  • fabioambrosio
  • Accounting, Taxes, Generally Accepted Accounting Principles, partner, partnership net profit

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