# Enrolled Agent Exam [Part 2] 05, Partnership Formation — §721 Nonrecognition

Page: https://stenobird.com/podcast/finance-exam-prep-7658413/enrolled-agent-exam-part-2-05-partnership-formation-721-nonrecognition
Text version: https://stenobird.com/podcast/finance-exam-prep-7658413/enrolled-agent-exam-part-2-05-partnership-formation-721-nonrecognition.md
Podcast: [Finance Exam Prep](https://stenobird.com/podcast/finance-exam-prep-7658413)
Published: 2026-05-02T22:41:20+00:00
Episode link: https://open-exam-prep.com/
Audio file: https://episodes.captivate.fm/episode/1fc451c9-9cdd-4bcb-899a-1e67c51f9788.mp3
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Duration seconds: 267

## Resource

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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## Transcript

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