- 11 - determining his or her income tax, a partner must take into account his "distributive share" of each item of partnership income, gain, loss, deduction, and credit. Sec. 702. Each partner is taxed on his distributive share of partnership income without regard to whether the income is actually distributed to him. Sec. 1.702-1(a), Income Tax Regs. Section 722 provides that the basis of a partnership interest acquired by contribution of money or other property to a partnership is the amount of such money, and the adjusted basis of such property, increased by any gain recognized under section 721(b) to the contributing partner at such time. A partner's basis of his partnership interest is subject to adjustments. In particular, a partner's share of liabilities of the partnership are included in computing the partner's tax basis of his partnership interest. Cf. Crane v. Commissioner, 331 U.S. 1 (1947). Section 752(a) provides that any increase in a partner's share of the liabilities of a partnership, or any increase in a partner's individual liability by reason of the assumption by such partner of partnership liabilities, shall be considered a contribution of money by such partner to the partnership. This contribution results in an increase in the partner's basis of his partnership interest. Sec. 722. Section 752(b) provides that any decrease in a partner's share of the liabilities of a partnership, or any decrease in aPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011