Section 724

Question 1

Per Section 724(a), how should the gain or loss recognized upon disposition from unrealized receivables contributed by a partner be treated?

Answer 1

Ordinary gain/loss to the partnership, no matter how long it is held by the partnership

Question 2

Per Section 724(b), how should the gain or loss recognized upon disposition from inventory contributed by a partner be treated?

Answer 2

Any gain or loss recognized by the partnership within 5 years of the contribution is characterized as ordinary.

Question 3

Per Section 724(c), how should the gain or loss recognized upon disposition from capital loss property contributed by a partner be treated?

Answer 3

If the capital asset has a built in loss then, to the extent of the amount of that built-in loss, any loss recognized on that property by the partnership within 5 years of the contribution is characterized as capital.