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partner's individual liabilities by reason of the assumption by
the partnership of such individual liabilities, shall be
considered as a distribution of money to the partner by the
partnership. Likewise, such a decrease in a partner's share of
the liabilities of a partnership results in a reduction in a
partner's tax basis in his partnership interest. Sec. 722.
A partner's contribution of a promissory note to a
partnership will not, in and of itself, establish basis since the
note is not deemed to be cash, and is not property in which the
partner possesses a basis. Sec. 722; Gemini Twin Fund III v.
Commissioner, T.C. Memo. 1991-315, affd. without published
opinion 8 F.3d 26 (9th Cir. 1993). However, in order for a
limited partner to acquire basis in his or her partnership
interest with respect to the contribution of a promissory note,
the rules of section 752(a) apply. Accordingly, if the limited
partner's share of the partnership's liabilities is increased
upon the contribution of a promissory note, the increase will be
treated as a contribution of money, and will, therefore, increase
basis pursuant to section 722. Sec. 1.752-1(e), Income Tax
Regs.9
The aforementioned provisions' requirement that the limited
partner is obligated to make an additional contribution is
satisfied if the limited partner has an unconditional, ultimate
9Applicable to partnership liabilities incurred or assumed
before Jan. 30, 1989.
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