Section 721 provides that, in general, no gain or loss is recognized by the partnership or...

Section 721 provides that, in general, no gain or loss is recognized by the partnership or the partner on contribution of appreciated or depreciated property to a partnership in exchange for an interest in the partnership.

True

False

All costs of organizing a partnership cannot be deducted in the year in which the partnership begins business.

True
False

Solutions

Expert Solution

ANSWER 1

according to section 172 of IRS no gain or loss should be recognised for the partnership or any partner in case of contribution of property to the partnership in exchange for an interest in the partnership.

Although the section does not apply to investment companies.

hence the statement is TRUE

ANSWER 2

if a partnership incurres 55000 or more it may not deduct it may not deduct any of the cost immidiately but rather over 180 months from date of beginning of the business as amortization.

although not all costs are allowed as deduction. Only 5000 of startup cost is allowed as deduction in the first year.

Startup expenditures for interest, real estate taxes, and research and experimental costs are allowed as expense for the same year and not for amortization in 180 months.

cost to aquire plant and machinery cannot be deducted as startup cost but be deducted under relevant section.

As cost upto $5000 can be deducted in the year in which partnership begins. The statement is TRUE

ekkarill92 answered 1 year ago

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