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705(a) provides that the adjusted basis of a partner’s interest in
a partnership is the basis as determined under section 7225
(relating to contributions to a partnership) or section 7426
(relating to transfers of partnership interests) (1) increased by
the partner’s distributive share of partnership income for the
current and prior years and (2) decreased (but not below zero) by
the amount of distributions from the partnership under section 7337
and by the partner’s distributive share of partnership losses for
the current and prior years.
5 Sec. 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 sec. 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).
6 Sec. 742 provides: “The basis of an interest in a
partnership acquired other than by contribution shall be determined
under part II of subchapter O (sec. 1011 and following).” In
general, the basis of property acquired by gift is the same as it
was in the hands of the donor. Sec. 1015. For purposes of
determining loss, however, if that basis is greater than the fair
market value of the property at the time of the gift, then the
basis is the fair market value at the time of the gift. Id.
7 In the case of a distribution by a partnership to a
partner other than in liquidation of a partner’s interest, the
adjusted basis of the partner is reduced by the amount of money
distributed to that partner. Sec. 733. Additionally, any decrease
in a partner’s share of the liabilities of a partnership is
considered a distribution of money to the partner by the
partnership. Sec. 752(b).
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