The purpose of Section 704(c) is to prevent taxable gain or loss inherent in property at time of contribution from being shifted to another partner- looks to the difference between adjusted tax basis and fair market value upon contribution.
What is 704b depreciation?
B claims accelerated depreciation, which reduces the tax basis of a property value to $400. To calculate the depreciation of the depreciable property under section 704 (b), it should have the same ratio as tax depreciation has to the tax basis, unless it is done according to the remedial method under section 704 (c).
What is the basis of property contributed to a partnership?
The basis of property contributed to a partnership by a partner shall be the adjusted basis of such property to the contributing partner at the time of the contribution increased by the amount (if any) of gain recognized under section 721(b) to the contributing partner at such time.
What is 704 C built-in gain?
Section 704(c) is intended to ensure that, when a partner contributes built-in-gain or built-in-loss property to the partnership, the contributing partner will bear (and cannot shift to the other partners) the tax consequences of the built-in gain or loss.
How is depreciation allocated under Section 704 ( C )?
While all depreciation is generally shared 50/50, Section 704 (c) principles require that the first dollars of tax depreciation be allocated to the non-contributing partner, B, until B has received an allocation of tax depreciation equal to the allocation of book depreciation.
How are gains and losses allocated in Section 704?
II book// value, Section 704(c)(l)(A) requires income, gain/ loss, and deduction with respect to such property to be allocated among the partners 11SO as to take account of the variation between the basis of the property to the partnership and its FMV at
What do you need to know about Sec 704 ( C )?
704(c) generally. Under Sec. 704(c), a partnership must allocate income, gain, loss, and deduction with respect to property contributed by a partner in a manner that takes into account any built-in gain or loss at the time of the contribution.
When is property contributed to a partnership Sec 704?
Under Regs. Sec. 1.704-3 (a) (3), property contributed to a partnership is Sec. 704 (c) property if, at the time of contribution, its book value differs from the contributing partner’s adjusted tax basis.
