In short
Outside basis is a partner's tax basis in a partnership interest. It starts with money and the adjusted basis of property contributed, rises with the partner's share of income and liabilities, and falls with distributions, losses and decreases in liabilities.
Key takeaways
- Losses are deductible only up to outside basis.
- Cash distributions above outside basis trigger gain.
- Inside basis is the partnership's own basis in its assets.
Where it's tested
REG: Partnership Taxation — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A partner has an outside basis of $20,000, which includes a $12,000 share of partnership liabilities. The partnership repays all of its debt. What is the tax consequence to the partner?