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allocable to Mr. Forsythe for the reasons discussed below.
II. Allocation of Recourse Liability
A partner’s distributive share of partnership loss is
allowed only to the extent of the adjusted basis of the partner’s
interest in the partnership at the end of the partnership year in
which such loss occurred. Sec. 704(d). As relevant here, the
partner’s adjusted basis in the partnership interest is the basis
of such interest determined under section 722, increased or
decreased by the partner’s distributive share of income, loss,
and applicable expenditures. Sec. 705(a)(1) and (2). The basis
of an interest in a partnership acquired by a contribution of
property, including money, is the amount of money and the
adjusted basis of such property to the partner at the time of
contribution, increased by the amount of any gain recognized
under section 721(b) at the time. Sec. 722. Any increase in a
partner’s share of liabilities of the partnership is considered a
contribution by such partner to the partnership, and,
consequently, increases the basis of the partner’s interest in
the partnership. Sec. 752(a); sec. 1.752-1(b), Income Tax Regs.;
see HGA Cinema Trust v. Commissioner, 950 F.2d 1357, 1362 (7th
Cir. 1991), affg. T.C. Memo. 1989-370; Callahan v. Commissioner,
98 T.C. 276, 280 (1992).
The regulations guide our allocation of the instant
partnership recourse liability. See sec. 7805(a); sec. 1.752-
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