Answers · Partnerships · Form 1065
How Should Partner Contributions Be Recorded?
Partner contributions generally increase capital and outside basis; property contributions can create §704(c) built-in gain/loss tracking.
How it works
The rule, and what it turns on.
Contributions are not partnership revenue and book value can differ from tax basis.
Example
Equipment with $20,000 tax basis and $50,000 value can be contributed tax-free under §721, while §704(c) tracks built-in gain.
Common mistakes
What we see go wrong, and what we do instead.
- Crediting contribution to income.
- Ignoring carryover basis.
A better approach
- Maintain separate book-value and tax-basis schedules for contributed property.
Authority
Where this comes from, so you can check it.
IRC §§704(c), 721-723.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
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