U.S. Code » Title 26 » Subtitle Subtitle A— Income Taxes › Chapter CHAPTER 1— NORMAL TAXES AND SURTAXES › Subchapter Subchapter K— Partners and Partnerships › Part PART I— DETERMINATION OF TAX LIABILITY

26 U.S.C. § 705

Determination of basis of partner’s interest

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(a) General ruleThe adjusted basis of a partner’s interest in a partnership shall, except as provided in subsection (b), be the basis of such interest determined under section 722 (relating to contributions to a partnership) or section 742 (relating to transfers of partnership interests)—(1) increased by the sum of his distributive share for the taxable year and prior taxable years of—(A) taxable income of the partnership as determined under section 703(a),(B) income of the partnership exempt from tax under this title, and(C) the excess of the deductions for depletion over the basis of the property subject to depletion;(2) decreased (but not below zero) by distributions by the partnership as provided in section 733 and by the sum of his distributive share for the taxable year and prior taxable years of—(A) losses of the partnership, and(B) expenditures of the partnership not deductible in computing its taxable income and not properly chargeable to capital account; and(3) decreased (but not below zero) by the amount of the partner’s deduction for depletion for any partnership oil and gas property to the extent such deduction does not exceed the proportionate share of the adjusted basis of such property allocated to such partner under section 613A(c)(7)(D).(b) Alternative rule

The Secretary shall prescribe by regulations the circumstances under which the adjusted basis of a partner’s interest in a partnership may be determined by reference to his proportionate share of the adjusted basis of partnership property upon a termination of the partnership.

(Aug. 16, 1954, ch. 736, 68A Stat. 242; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), title XXI, § 2115(c)(3), Oct. 4, 1976, 90 Stat. 1834, 1909; Pub. L. 98–369, div. A, title VII, § 722(e)(1), July 18, 1984, 98 Stat. 974.)Editorial NotesAmendments

1984—Subsec. (a)(3). Pub. L. 98–369 substituted “for any partnership oil and gas property to the extent such deduction does not exceed the proportionate share of the adjusted basis of such property allocated to such partner under section 613A(c)(7)(D)” for “under section 611 with respect to oil and gas wells”.

1976—Subsec. (a)(3). Pub. L. 94–455, § 2115(c)(3), added par. (3).

Subsec. (b). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Statutory Notes and Related SubsidiariesEffective Date of 1984 Amendment

Pub. L. 98–369, div. A, title VII, § 722(e)(3)(A), July 18, 1984, 98 Stat. 974, provided that: “The amendment made by paragraph (1) [amending this section] shall take effect on January 1, 1975.”

Effective Date of 1976 Amendment

Amendment by section 2115(c)(3) of Pub. L. 94–455 effective on Jan. 1, 1975, and applicable to taxable years ending after Dec. 31, 1974, see section 2115(f) of Pub. L. 94–455, set out as a note under section 613A of this title.

Notes of Decisions
Cited in 19 cases (1 in the last 5 years), 1927–2022 · leading case: Stephen Babin Betty Boehm Babin v. Comm'r of Internal Revenue, 23 F.3d 1032 (6th Cir. 1994).
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Stephen Babin Betty Boehm Babin v. Comm'r of Internal Revenue, 23 F.3d 1032 (6th Cir. 1994). · cites it 14× “1 On appeal, the sole issue is whether the Tax Court erred in failing to increase the adjusted basis of petitioner’s interest in a partnership under 26 U.S.C. § 705 (a)(1)(A) by the amount of the discharge of indebtedness income that petitioner did not have to recognize by…”
Paul P. Brountas v. Comm'r of Internal Revenue, Paul P. & Lynn T. Brountas v. Comm'r of Internal Revenue, 692 F.2d 152 (1st Cir. 1982). · cites it 2× “26 U.S.C. §§ 705 & 722 (1976). But, in our example, that amounted only to $4,000.”
Sala v. United States, 613 F.3d 1249 (10th Cir. 2010). “See 26 U.S.C. §§ 705 , 722. During the one-month existence of Deerhurst GP, the long and short options were sold, resulting in a profit of between $90,000 and $110,000.”
Crc Corp. v. Comm'r of Internal Revenue. Crc Corp. v. Comm'r of Internal Revenue, 693 F.2d 281 (3rd Cir. 1982). “Thus the limited partners contend that they can deduct from other income losses resulting from whatever expense the limited partnership may accrue.”
United States v. James A. Simon, 727 F.3d 682 (7th Cir. 2013). “Simon noted that a partner’s adjusted basis is generally determined by 26 U.S.C. §§ 705 . A partner’s adjusted basis increases, Simon contended, when the partner’s share of partnership liability increases.”
Blockburger v. United States, 50 F.2d 795 (7th Cir. 1931). · cites it 2× “(26 USCA § 705), provides: "Any person who violates or fails to comply with any of the requirements of sections 211 and 691 to 707 of this title shall, on conviction, be fined not more than $2,000 or be imprisoned not more than five years, or both, in the discretion of the court.”
Est. of Michael Newman, Deceased, Sidney Newman, & Alice Newman, & Alice Newman v. Comm'r of Internal Revenue, 934 F.2d 426 (2d Cir. 1991). “5 See 26 U.S.C. § 705 (a)(1)(A). This adjustment protected them from double taxation, i.”
Raghunathan Sarma v. Comm'r of Internal Revenue, 45 F.4th 1312 (11th Cir. 2022). “26 U.S.C. § 705 (a). In computing its outside basis in Kearney, Lincoln increased its outside basis to account for the gain legs from the FX straddles, but it did not decrease its basis to account for the unrealized losses from the loss legs.”
Kearney Partners Fund, LLC ex rel. Lincoln Partners Fund, LLC v. United States, 803 F.3d 1280 (11th Cir. 2015). “See 26 U.S.C. § 705 (a)(1). The exactitude of these numbers simply cannot be mere coincidence.”
Principal Life Ins. Co. & Subsidiaries v. United States, 120 Fed. Cl. 41 (Fed. Cl. 2015). · cites it 2× “” 26 U.S.C. § 705 (a)(1)(B). Under a “plain reading” of this provision and the regulations thereunder, see Treas.”
Coykendall v. Skrmetta, 22 F.2d 120 (5th Cir. 1927). “§ 6287o [26 USCA § 705]), furnishes no substantial support for a finding that it was then likely that he would be convicted of the offense charged and imprisoned therefor.”
Kwong How v. United States, 71 F.2d 71 (9th Cir. 1934). “The appellants, Kwong How and Loo Choo were, on the 5th day of June, 1933, separately indicted for violation of the Harrison Anti-Narcotic Act, § 9 (26 USCA § 705), and the Jones-Miller Act, § I (2L USCA § 174).”
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