Partners A and B form a partnership where each receive a 50% interest in capital and profits. Partner A contributes cash of $25,000 and land valued at $25,000. Partner A has a basis in the land of $20,000 and has held it for two years. Partner B contributes equipment (with a basis to B of $15,000 and a fair market value of $30,000) and inventory (with a basis to B of $10,000 and a fair market value of $20,000). Partner B would recognize Section 1245 gain of $15,000 on the hypothetical sale of the equipment to a third party at the time of contribution after having depreciated it for several years. What basis and holding period does the partnership assume in each of its assets?

A.	The partnership assumes a transferred basis in each property that it receives equal to the basis of the transferring partner. The partnership also assumes a transferred holding period in each property it receives that includes the holding period of the transferring partner.
	B.	The partnership assumes a transferred basis of $20,000 in the land received from A along with a two year holding period that includes As holding period. The partnership assumes a basis of $30,000 in the equipment because B is subject to Section 1245 recapture on the exchange. The partnerships holding period begins the day following its acquisition of the equipment. The partnership assumes a basis of $10,000 in the inventory equal to Bs basis prior to the exchange. The holding period of inventory property always begins the day after its acquisition.
	C.	The partnership assumes a basis in each property equal to its fair market value at the time of contribution. The partnerships holding period in each property received begins the day following its receipt of the property.
	D.	The partnership assumes a transferred basis of $20,000 in the land received from A along with a two year holding period that includes As holding period. The partnership assumes a basis of $30,000 in the equipment because B is subject to Section 1245 recapture on the exchange. The partnerships holding period in the equipment begins the day after it is received. The partnership assumes a basis of $20,000 in the inventory because B must recognize $10,000 of ordinary income on the transfer. The partnerships holding period in the inventory begins the day after it is received.