swaitsandClaude Opus 5.5
ea14dfc986
Book value is cost less what the books posted; the schedule's figure is apart. An asset's acquired date comes from its entry. Contributed property keeps its section 723 carryover basis apart from its depreciable basis (the lower of value and adjusted basis), with its 704(c) built-in gain and method. The K-1 worksheet reports tax-basis capital (Form 1065 Item L) beside the book figures, leaving open what only the CPA knows. Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com> Claude-Session: https://claude.ai/code/session_01T3gXMVt7XJPi6ens1or9Dj
73 lines
2.5 KiB
TOML
73 lines
2.5 KiB
TOML
# P3 defect 13, named regression 4
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# (personal_use_contribution_keeps_its_723_basis_apart_from_depreciable_basis).
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id = "assets-723-basis-apart-from-depreciable-basis"
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title = "Property contributed from personal use: the §723 basis apart from the depreciable basis"
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rule = "The partnership's basis in property a partner contributes is the partner's adjusted basis (IRC §723). Its depreciable basis, for property converted from personal use, is the lesser of fair market value and that adjusted basis at conversion (CHOICE recorded by the owner as D-41, the CPA to confirm). The §704(c) built-in gain or loss is fair market value less the §723 basis at contribution; a built-in loss counts only for the contributing partner (IRC §704(c)(1)(C))."
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status = "AUTHORITY"
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sources = [
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"26 U.S.C. §723",
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"Treas. Reg. §1.168(i)-4(b)(1): 'the lesser of its fair market value or its adjusted depreciable basis'",
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"IRS Pub. 946 (2025), Property changed from personal use",
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"Treas. Reg. §1.704-3(a)(3)(ii)",
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"26 U.S.C. §704(c)(1)(C)",
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]
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tags = ["fixed-assets", "tax-basis", "partnerships", "704c"]
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[setup]
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currency = "USD"
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fiscal_year_start = "01-01"
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basis = "accrual"
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rounding = "half-away-from-zero"
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[[setup.accounts]]
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code = "1500"
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name = "Equipment"
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type = "asset"
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[[setup.accounts]]
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code = "1510"
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name = "Accumulated Depreciation"
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type = "asset"
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[[setup.accounts]]
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code = "3000"
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name = "Capital"
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type = "equity"
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[[setup.accounts]]
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code = "6200"
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name = "Depreciation Expense"
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type = "expense"
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# A laptop a member contributes from personal use: worth 1,440.00, held by
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# the member at an adjusted basis of 1,688.40. (Nothing rounds here.)
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[[setup.assets]]
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id = "laptop"
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description = "Laptop"
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cost = "1440.00"
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salvage = "0.00"
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life_months = 36
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in_service = "2026-01-01"
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method = "straight_line"
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cost_account = "1500"
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accumulated_account = "1510"
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expense_account = "6200"
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acquired_by = 1
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basis = { rule = "personal_use_conversion", contributor_adjusted_basis = "1688.40", fmv_at_contribution = "1440.00" }
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[[events]]
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date = "2026-01-01"
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description = "Laptop contributed at its value"
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lines = [
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{ account = "1500", side = "debit", amount = "1440.00" },
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{ account = "3000", side = "credit", amount = "1440.00" },
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]
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# Hand check: §723 basis 1,688.40 (the member's adjusted basis).
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# Depreciable: the lesser of 1,440.00 and 1,688.40 = 1,440.00. Built-in
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# gain: 1,440.00 - 1,688.40 = -248.40, a loss (§704(c)(1)(C)).
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[[expect]]
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query = "asset_basis"
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asset = "laptop"
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values = { tax_basis_723 = "1688.40", depreciable_basis = "1440.00", built_in_gain_704c = "-248.40", sec704c_1c = "true" }
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