Question

Jay has a tax basis of $30,000 in his partnership interest at the beginning of the partnership tax year. The following amounts of partnership debt were allocated to Jay and are included in his beginning of the year tax basis: (1) recourse debt - $19,000, (2) qualified nonrecourse debt - $1,000, and (3) nonrecourse debt - $2,100. There were no changes to the debt allocated to Jay during the tax year. If Jay is allocated a $31,000 loss for the current year, how much of the loss will be suspended under the tax basis and at-risk limitations?

Answer 1

Solution.

The basis of a partnership interest is the money plus the adjusted basis of any property the partner contributed. If the partner must recognize gain as a result of the contribution, this gain is included in the basis of his or her interest. Any increase in a partner's individual liabilities because of an assumption of partnership liabilities is considered a contribution of money to the partnership by the partner.

Interest acquired by gift, etc. If a partner acquires an interest in a partnership by gift, inheritance, or under any circumstance other than by a contribution of money or property to the partnership, the partner's basis must be determined using the basis rules described in Publication 551