When a partnership receives property from a partner. The basis for the contributed property in the partnership's hands is usually the adjusted tax basis of the contributing partner in the property when it was contributed. 

These are some important considerations:

• Typically, the partnership's basis in the contributed property is the adjusted tax basis of the contributing partner plus any gain acknowledged under specific rules.
• If the property that was contributed has liabilities, the partnership's basis will be adjusted accordingly. When the partnership assumes liability, the partner's basis in the partnership interest decreases.
• If the contributed property has a built-in gain or loss, special rules apply to ensure that the gain or loss is allocated to the contributing partner when the property is sold or disposed of.
• The holding period for the contributed property includes the period when the contributing partner currently holds the property.

Here is an illustration to aid in comprehension:

Partners A, B, and C formed a calendar-year partnership and agreed to share the profit and loss equally.

• A building was provided by Partner A, which has an adjusted basis of $100,000 and a Fair Market Value of $130,000. Also, the partnership took care of the partner's $60,000 mortgage.
• Partner B made a cash contribution of $40,000 to acquire an interest of 33.33% in the partnership.
• Partner C's contribution of $40,000 was sufficient to acquire a 33.33% interest in the partnership.

What is the partnership's approach to estimating building depreciation?

At the time of contribution, the contributing partner's basis is the basis for the partnership in the property. Thus, the partnership's basis in the building is $100,000 adjusted basis. Realized gain or recognized gain is determined through the use of a mortgage, not depreciation.