Dakotah Hills Offices Limited Partnership, An Arizona Limited Partnership, William M. and Dianne B. Stephens, Tax Matters Partner, et al. - Page 12

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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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