- 42 -
218 (8th Cir. 1992). Any gain recognized under section 731(a) is
considered as gain from the sale or exchange of the partnership
interest of the distributee partner. Sec. 731(a); P.D.B. Sports,
Ltd. v. Commissioner, 109 T.C. 423, 441 (1997). In the case of a
sale or exchange of an interest in a partnership, gain recognized
to the transferor partner is generally treated as gain from the
sale or exchange of a capital asset. Sec. 741; Colonnade Condo.,
Inc. v. Commissioner, 91 T.C. 793, 814 (1988).
Section 722 provides that the basis of a partnership
interest acquired by contribution of property, including money,
is “the amount of such money and the adjusted basis of such
property to the contributing partner at the time of the
contribution”. For purposes of section 722, a contribution of
money includes “Any increase in a partner’s share of the
liabilities of a partnership, or any increase in a partner’s
individual liabilities by reason of the assumption by such
partner of partnership liabilities”. Sec. 752(a). Section
705(a) provides the general rule for determining the adjusted
basis of a partner’s interest as determined under section 722.
In relevant part, section 705(a) provides that the adjusted basis
of a partner’s interest in a partnership is the basis determined
under section 722 (1) increased by the partner’s distributive
share of partnership income for the tax year and prior years and
(2) decreased (but not below zero) by distributions from the
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 NextLast modified: May 25, 2011