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Question

My friend and I formed a general investment partnership last year in March. One of our members transferred some stocks he initially bought in Nov 2007. I am wondering about the cost basis or holding period of the partnership for these stocks. Should the holding period include only the transfer date to the club or the partner's holding period/initial basis cost?

Submitted: 291 days and 3 hours ago.
Category: Tax
Value: $15
Status: CLOSED

Accepted Answer

Greetings,

 

Generally the cost and holding period of the partner are used by the partnership for any stock contributed to the partnership by a partner.

 

You may or may not be aware of the rules that will require any appreciation prior to the contribution to be taxable to the contributing partner upon disposition of the stock. The contributed assets have built-in gain (BIG), which eventually will be subject to income tax when realized by the partnership; but under Sec. 704(c), this BIG is taxed to the contributor.

 

If you have not already had conversations with a tax practitioner experienced with investment partnerships please consider that the time and effort spent may avoid unintended tax consequences in the future.

 

Best regards.

 

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Expert: John Gordos EA
Pos. Feedback: 99.8 %
Accepts: 
Answered: 2/5/2009

Enrolled Agent

I have prepared individual, trust, partnership, and corporate taxes since 1987.

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