Can partners make tax-deferred contributions of assets to a partnership?

Partners indeed have the ability to make tax-deferred contributions of assets to a partnership at any time. This is a key feature of partnership taxation under the Internal Revenue Code. When a partner contributes property to a partnership, they generally do not recognize any gain or loss at the time of the contribution, allowing for a deferral of taxation on appreciated assets.

This tax-deferral mechanism applies irrespective of whether the partnership is newly formed, currently operating, or generating profits. Thus, partners enjoy flexibility in making contributions whenever they see fit without immediate tax consequences.

The other potential options imply limitations that do not align with current tax law. For instance, suggesting contributions can only be made at the beginning of the partnership overlooks the ongoing opportunities partners have to contribute assets. Similarly, tying contributions to the partnership's profitability misrepresents the independent nature of asset contributions relative to the economic performance of the partnership. Additionally, stating that contributions are always taxable contradicts the fundamental principles of partnership taxation, as tax-deferred contributions are a significant benefit of this business structure.