The basis to a partner of a partnership interest acquired by a contribution of property, including money, to the partnership shall be the amount of money contributed plus the adjusted basis at the time of contribution of any property contributed. If the acquisition of an interest in partnership capital results in taxable income to a partner, such income shall constitute an addition to the basis of the partner's interest. See paragraph (b) of § 1.721-1. If the contributed property is subject to indebtedness or if liabilities of the partner are assumed by the partnership, the basis of the contributing partner's interest shall be reduced by the portion of the indebtedness assumed by the other partners, since the partnership's assumption of his indebtedness is treated as a distribution of money to the partner. Conversely, the assumption by the other partners of a portion of the contributor's indebtedness is treated as a contribution of money by them. See section 752 and § 1.752-1. See § 1.460-4(k)(3)(iv)(A) for rules relating to basis adjustments required where a contract accounted for under a long-term contract method of accounting is transferred in a contribution to which section 721(a) applies. The provisions of this section may be illustrated by the following examples:
Example 1.A acquired a 20-percent interest in a partnership by contributing property. At the time of A's contribution, the property had a fair market value of $10,000, an adjusted basis to A of $4,000, and was subject to a mortgage of $2,000. Payment of the mortgage was assumed by the partnership. The basis of A's interest in the partnership is $2,400, computed as follows:
| Adjusted basis to A of property contributed | $4,000 |
| Less portion of mortgage assumed by other partners which must be treated as a distribution (80 percent of $2,000) | 1,600 |
| Basis of A's interest | 2,400 |
| Adjusted basis to A of property contributed | $4,000 |
| Less portion of mortgage assumed by other partners which must be treated as a distribution (80 percent of $6,000) | 4,800 |
| (800) |
Notes of Decisions
Tigers Eye Trading, LLC v. Comm'r, 138 T.C. 67 (Tax Ct. 2012).
· cites it 6× “The original outside basis of a partner who obtains his interest in the partnership by purchase is his cost basis equal to the purchase price.”
Elrod v. Comm'r, 87 T.C. 1046 (Tax Ct. 1986).
· cites it 2× “We conclude that, as of 1977, petitioner's total basis in the partnership equaled $ 132,500, that is, $ 7,500 for the land deemed contributed plus $ 125,000 (5% X $ 2,500,000) for the nonrecourse partnership debt, as respondent has determined in the notice of deficiency.”
436, Ltd., Heitmeier v. Comm'r, 2015 T.C. Memo. 28 (Tax Ct. 2015).
· cites it 2× “" "Long" can mean several things in finance-speak; here, it simply means to buy and hold a position. "Short" likewise has multiple meanings: Here, it means to sell a position.”
Tufts v. Comm'r, 70 T.C. 756 (Tax Ct. 1978).
· cites it 2× “705-1(a)(4) , 1.722-1 , and 1.752-1(a) and (e), Income Tax Regs.”
Oden v. Comm'r, 41 T.C.M. 1285 (Tax Ct. 1981).
· cites it 2× “Petitioner urges that we determine that his basis in the Ohio Producers partnership includes the face amount ($ 18,750) of a note allegedly executed and delivered by him to the partnership.”
6611, Ltd. v. Comm'r, 2013 T.C. Memo. 49 (Tax Ct. 2013).
· cites it 2× “If the inflated basis in a Son-of-BOSS deal is attached to a partner's interest in a supposed partnership and a loss is realized when he disposes of that partnership interest through sale or the partnership's liquidation, it is called an outside-basis SoB.”
Shaheen v. Comm'r, 44 T.C.M. 694 (Tax Ct. 1982).
· cites it 2× “But see sec. 1.722-1, Income Tax Regs. ↩ ; 1 W.”
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