Blaine contributes property valued at $50,000 (basis of $40,000) in exchange for a 25% interest in the BIKE Partnership. If the property is later sold for $70,000, gain of $15,000 will be allocated to Blaine.
Answer the following statement true (T) or false (F)
True
Rationale: If appreciated property is contributed to a partnership, any recognized precontribution gain must be allocated to the partner that contributed the property. This applies only to the appreciation at the contribution date. Any appreciation after that date is allocated proportionately to the partners (or in accordance with the partnership agreement). In this case, the precontribution gain of $10,000 must be allocated to Blaine, plus $5,000 [25% × ($70,000 – $50,000)] of the gain arising since the property was contributed.
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