Video: Contributing Non-Cash Property to a Partnership

Tax Planning for Partnerships involves strategizing to optimize the tax obligations of entities structured as partnerships by leveraging various tax laws and provisions. This includes considering the timing of income recognition, the allocation of taxable income and deductions among partners, and the selection of accounting methods that align with the partnership's business objectives while maintaining compliance with tax regulations.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Like we promised, we're jumping right into our practical applications, scenarios, examples. Now, when a partner contributes non-cash property to a partnership, the tax implications vary depending on whether the property has appreciated or depreciated in value, which makes sense. Very much so. I mean, first off, you could say, if appreciated property is going to cause a gain and then depreciated property may cause a loss. So obviously, for sure, going to see that in play. We want to understand these scenarios, as we see here, it's crucial for planning, pretty self-explanatory. First, we're going to see an example of a contribution of appreciated non-cash property. Here, we see that Jane contributes land to ABC Partnership. She originally purchased the land for $100,000, which is her basis. And at the time of contribution, its fair market value is $150,000. You definitely want to drill it into your mind. Basis is always going to be the most important thing. Obviously, you will use fair market value here and there when it comes to reg and TCP and tax, but overall fair market value, much more used general rule. If you're blanking out on the exam, fair market value, much more used for financial accounting basis, much more used for tax. But again, they're both used in both situations. It's just, if you're going back and forth between which number you should use, again, that is a general rule. If you're at your last, your wits end, you're not really sure which number to go for. So what are the tax implications here? No gain recognition. Generally, no gain is recognized by Jane upon contribution. Partnership assumes Jane's basis of $100,000 in the land. A lot of these rules, we go more into depth on when it comes to our other

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Partnerships

Module: 4 Concepts, 48 Videos

Partnerships: Formation Overview

2:59

Introduction to Partnerships: Formation

4:13

Partnership Stages

10:30

Types of Partners