Answers · Partnerships · Form 1065
Tax Basis vs. Capital Account
Partner capital is not the same as outside tax basis.
This question is answered in full on the main page for it.
How it works
The rule, and what it turns on.
Outside basis can include the partner’s share of qualifying partnership liabilities and other adjustments not reflected in tax-basis capital.
Example
Tax-basis capital $50,000 plus $80,000 liability share can result in outside basis of $130,000 before other items.
Common mistakes
What we see go wrong, and what we do instead.
- Using K-1 capital as basis.
A better approach
- Maintain an outside basis rollforward for each partner.
Authority
Where this comes from, so you can check it.
IRC §§705, 722, 733 and 752; Treas. Reg. §§1.705-1 and 1.752-1 through -5; IRS Publication 541.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
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