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Adjusted Basis
1. The circumstances are such that the partner cannot practicably apply
the general basis rules.
2. It is, in the opinion of the IRS, reasonable to conclude that the result
produced will not vary substantially from the result under the general
basis rules.
All of the partnership's assets have a value of zero, except for property
contributed to secure a liability.
All property is disposed of by the partnership in a fully taxable transaction
for no consideration (except relief from liabilities for which the creditor's
right to reimbursement is limited solely to one or more assets of the
partnership).
All items of income, gain, loss, or deduction are allocated to the partners.
Example. Ted and Jane form a cash basis general partnership with
cash contributions of $20,000 each. Under the partnership agreement,
they share all partnership profits and losses equally. They borrow
$60,000 and purchase depreciable business equipment. This debt is
included in the partners' basis in the partnership because incurring it
creates an additional $60,000 of basis in the partnership's depreciable
property.