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A partner’s adjusted basis in the partner’s interest in the
partnership is the basis of such interest determined under
section 722, increased by the partner’s distributive share of
income and decreased by the partner’s distributive share of 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 the liabilities of the partnership is
considered a contribution of money by such partner to the
partnership and, consequently, increases the basis of the
partner’s interest in the partnership. Secs. 705(a), 722,
752(a). Any decrease in a partner’s share of the liabilities of
the partnership is considered a distribution of money to the
partner by the partnership and, consequently, decreases the basis
of the partner’s interest in the partnership. Secs. 705(a)(2),
733, 752(b). The basis of a partner’s interest in the
partnership cannot be decreased below zero. See sec. 705(a).
Calculation of the Roses’ basis and of PK Venture’s basis in
their respective PKVI LP interests for purposes of these cases
must be consistent with treatment of the transfers from PK
Ventures and its subsidiaries to PKVI LP on the latter’s returns
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