-109- credit.79 Sec. 702(a); Vecchio v. Commissioner, 103 T.C. 170, 185 (1994). A partner’s distributive share of partnership loss (including capital loss) is allowed only to the extent of the partner’s adjusted basis in his or her partnership interest at the end of the partnership taxable year in which the loss occurred. Sec. 704(d); Oden v. Commissioner, T.C. Memo. 1981- 184, affd. without published opinion 679 F.2d 885 (4th Cir. 1982). Generally, when property is contributed to a partnership in exchange for a partnership interest, neither the partnership nor any of its partners recognize gain or loss. Sec. 721(a). The partner’s basis in a partnership interest acquired by a contribution of property to the partnership is the amount of any money contributed plus the contributing partner’s adjusted basis in other contributed property at the time of the contribution (“outside basis”). Sec. 722. Similarly, the partnership’s basis in property contributed to a partnership by a partner is the 79 A partner’s distributive share is generally determined by reference to the partnership agreement; however, if the allocations in the partnership do not have “substantial economic effect” (as determined under sec. 704 and the regulations), those allocations are disregarded. See Estate of Ballantyne v. Commissioner, 341 F.3d 802, 805 (8th Cir. 2003), affg. T.C. Memo. 2002-160. If the partnership agreement provides no allocation or the allocations provided therein lack substantial economic effect, a partner’s distributive share of partnership items shall be determined in accordance with the partner’s interest in the partnership (determined by taking into account all facts and circumstances). Sec. 704(b).Page: Previous 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 Next
Last modified: May 25, 2011