![Enrolled Agent Exam [Part 2] 05, Partnership Formation — §721 Nonrecognition](https://artwork.captivate.fm/66dc02ed-369e-49e5-89a7-db7df9f63a25/20260115-1339-Image-Generation-simple-compose-01kf1sj7hsfcqbept.png)
Enrolled Agent Exam [Part 2] 05, Partnership Formation — §721 Nonrecognition
About this episode
This episode discusses the nonrecognition of gain or loss on property contributions in partnership formation under §721.
This podcast is made by Ran Chen, who holds an EA license, Insurance and Securities licenses (Series 6, 63, 65), and the CFP® designation. He is passionate about opening access to high-quality exam preparation resources and helping learners prepare more effectively for professional certification exams. In this episode you will learn: - That under §721, neither the partner nor the partnership generally recognizes a gain or loss on the contribution of property for a partnership interest. - How a partner's initial basis is determined by the adjusted basis of the property they contribute, not its fair market value. - How liabilities assumed by the partnership reduce a partner's outside basis by the net amount of debt relief. - The critical exception where a partner must recognize capital gain if the net liability relief exceeds their contributed property's basis. - That contributing services for a partnership interest is a taxable event resulting in ordinary income, as §721 only applies to property. For more free exam prep tools, practice questions, and AI-powered explanations, visit https://open-exam-prep.com/ or YouTube Channel: https://www.youtube.com/@Open-exam-prep
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