Answers · Partnerships · Form 1065
What Is Partnership Basis?
Outside basis generally starts with contributions and changes for income, losses, distributions and liability shares.
How it works
The rule, and what it turns on.
Basis limits losses and affects distribution/sale tax consequences.
Example
$20,000 contribution + $40,000 debt share + $30,000 income - $10,000 distribution = $80,000 basis before other adjustments.
Common mistakes
What we see go wrong, and what we do instead.
- Negative basis.
- Ignoring debt changes.
A better approach
- Reconcile outside basis to K-1 and liability schedules annually.
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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