Partnership Formation and Operations (Fundamentals)

Question 1

What is Section 721?

Answer 1

Section 721 protects both the partnership and its partners from recognizing any
gain or loss on the transfer of property to a partnership in exchange for an interest in the partnership.

Question 2

What is Section 722?

Answer 2

Each contributing partner takes as her basis in the partnership interest received an amount equal to the sum of the adjusted basis she had in any contributed
property, plus any cash contributed. The partner’s basis in there interest is commonly referred to as her “outside basis”.

Question 3

What is Section 723?

Answer 3

The partnership takes a transferred basis in contributed property equal to that of the contributing partner. The partnership is also entitled to tack the partners’ holding periods to its own. Referred to as Partnerships “Inside Basis”