§705 — Determination of basis of partner’s interest
45 citing cases
Statute Text — 26 U.S.C. §705
The adjusted basis of a partner’s interest in a partnership shall, except as provided in subsection (b), be the basis of such interest determined under section 722 (relating to contributions to a partnership) or section 742 (relating to transfers of partnership interests)—
increased by the sum of his distributive share for the taxable year and prior taxable years of—
taxable income of the partnership as determined under section 703(a),
income of the partnership exempt from tax under this title, and
the excess of the deductions for depletion over the basis of the property subject to depletion;
decreased (but not below zero) by distributions by the partnership as provided in section 733 and by the sum of his distributive share for the taxable year and prior taxable years of—
losses of the partnership, and
expenditures of the partnership not deductible in computing its taxable income and not properly chargeable to capital account; and
decreased (but not below zero) by the amount of the partner’s deduction for depletion for any partnership oil and gas property to the extent such deduction does not exceed the proportionate share of the adjusted basis of such property allocated to such partner under section 613A(c)(7)(D).
The Secretary shall prescribe by regulations the circumstances under which the adjusted basis of a partner’s interest in a partnership may be determined by reference to his proportionate share of the adjusted basis of partnership property upon a termination of the partnership.
Treasury Regulations
-
Treas. Reg. §1.705-1Determination of basis of partner's interest
(a) General rule. (1) Section 705 and this section provide rules for determining the adjusted basis of a partner's interest in a partnership. A partner is required to determine the adjusted basis of his interest in a partnership only when necessary for the determination of his tax liability or that of any other person. The determination of the adjusted basis of a partnership interest is ordinarily made as of the end of a partnership taxable year. Thus, for example, such year-end determination is necessary in ascertaining the extent to which a partner's distributive share of partnership losses may be allowed. See section 704(d). However, where there has been a sale or exchange of all or a part of a partnership interest or a liquidation of a partner's entire interest in a partnership, the adjusted basis of the partner's interest should be determined as of the date of sale or exchange or liquidation. The adjusted basis of a partner's interest in a partnership is determined without regard to any amount shown in the partnership books as the partner's “capital”, “equity”, or similar account. For example, A contributes property with an adjusted basis to him of $400 (and a value of $1,000) to a partnership. B contributes $1,000 cash. While under their agreement each may have a “capital account” in the partnership of $1,000, the adjusted basis of A's interest is only $400 and B's interest $1,000.
(2) The original basis of a partner's interest in a partnership shall be determined under section 722 (relating to contributions to a partnership) or section 742 (relating to transfers of partnership interests). Such basis shall be increased under section 722 by any further contributions to the partnership and by the sum of the partner's distributive share for the taxable year and prior taxable years of:
(i) Taxable income of the partnership as determined under section 703(a),
(ii) Tax-exempt receipts of the partnership, and
(iii) The excess of the deductions for depletion over the basis of the depletable property, unless the property is an oil or gas property the basis of which has been allocated to partners under section 613A(c)(7)(D).
(3) The basis shall be decreased (but not below zero) by distributions from the partnership as provided in section 733 and by the sum of the partner's distributive share for the taxable year and prior taxable years of:
(i) Partnership losses (including capital losses), and
(ii) Partnership expenditures which are not deductible in computing partnership taxable income or loss and which are not capital expenditures.
(4) The basis shall be decreased (but not below zero) by the amount of the partner's deduction for depletion allowable under section 611 for any partnership oil and gas property to the extent the deduction does not exceed the proportionate share of the adjusted basis of the property allocated to the partner under section 613A(c)(7)(D).
(5) The basis shall be adjusted (but not below zero) to reflect any gain or loss to the partner resulting from a disposition by the partnership of a domestic oil or gas property after December 31, 1974.
(6) For the effect of liabilities in determining the amount of contributions made by a partner to a partnership or the amount of distributions made by a partnership to a partner, see section 752 and § 1.752-1, relating to the treatment of certain liabilities. In determining the basis of a partnership interest on the effective date of subchapter K, chapter 1 of the Code, or any of the sections thereof, the partner's share of partnership liabilities on that date shall be included.
(7) For basis adjustments necessary to coordinate sections 705 and 1032 in certain situations in which a partnership disposes of stock or any position in stock to which section 1032 applies of a corporation that holds a direct or indirect interest in the partnership, see § 1.705-2.
(8) For basis adjustments necessary to coordinate sections 705 and 358(h), see § 1.358-7(b). For certain basis adjustments with respect to a § 1.752-7 liability assumed by a partnership from a partner, see § 1.752-7.
(9) For basis adjustments necessary to coordinate sections 705 and 362(e)(2), see § 1.362-4(e)(1).
(b) Alternative rule. In certain cases, the adjusted basis of a partner's interest in a partnership may be determined by reference to the partner's share of the adjusted basis of partnership property which would be distributable upon termination of the partnership. The alternative rule may be used to determine the adjusted basis of a partner's interest where circumstances are such that the partner cannot practicably apply the general rule set forth in section 705(a) and paragraph (a) of this section, or where, from a consideration of all the facts, it is, in the opinion of the Commissioner, reasonable to conclude that the result produced will not vary substantially from the result obtainable under the general rule. Where the alternative rule is used, adjustments may be necessary in determining the adjusted basis of a partner's interest in a partnership. Adjustments would be required, for example, in order to reflect in a partner's share of the adjusted basis of partnership property any significant discrepancies arising as a result of contributed property, transfers of partnership interests, or distributions of property to the partners. The operation of the alternative rules may be illustrated by the following examples:
-
Treas. Reg. §1.705-1(a)General rule.
General rule. (1) Section 705 and this section provide rules for determining the adjusted basis of a partner's interest in a partnership. A partner is required to determine the adjusted basis of his interest in a partnership only when necessary for the determination of his tax liability or that of any other person. The determination of the adjusted basis of a partnership interest is ordinarily made as of the end of a partnership taxable year. Thus, for example, such year-end determination is necessary in ascertaining the extent to which a partner's distributive share of partnership losses may be allowed. See section 704(d). However, where there has been a sale or exchange of all or a part of a partnership interest or a liquidation of a partner's entire interest in a partnership, the adjusted basis of the partner's interest should be determined as of the date of sale or exchange or liquidation. The adjusted basis of a partner's interest in a partnership is determined without regard to any amount shown in the partnership books as the partner's “capital”, “equity”, or similar account. For example, A contributes property with an adjusted basis to him of $400 (and a value of $1,000) to a partnership. B contributes $1,000 cash. While under their agreement each may have a “capital account” in the partnership of $1,000, the adjusted basis of A's interest is only $400 and B's interest $1,000.
(2) The original basis of a partner's interest in a partnership shall be determined under section 722 (relating to contributions to a partnership) or section 742 (relating to transfers of partnership interests). Such basis shall be increased under section 722 by any further contributions to the partnership and by the sum of the partner's distributive share for the taxable year and prior taxable years of:
-
Treas. Reg. §1.705-1(b)Alternative rule.
Alternative rule. In certain cases, the adjusted basis of a partner's interest in a partnership may be determined by reference to the partner's share of the adjusted basis of partnership property which would be distributable upon termination of the partnership. The alternative rule may be used to determine the adjusted basis of a partner's interest where circumstances are such that the partner cannot practicably apply the general rule set forth in section 705(a) and paragraph (a) of this section, or where, from a consideration of all the facts, it is, in the opinion of the Commissioner, reasonable to conclude that the result produced will not vary substantially from the result obtainable under the general rule. Where the alternative rule is used, adjustments may be necessary in determining the adjusted basis of a partner's interest in a partnership. Adjustments would be required, for example, in order to reflect in a partner's share of the adjusted basis of partnership property any significant discrepancies arising as a result of contributed property, transfers of partnership interests, or distributions of property to the partners. The operation of the alternative rules may be illustrated by the following examples:
-
Treas. Reg. §1.705-1(i)§1.705-1(i)
Partnership losses (including capital losses), and
(ii) Partnership expenditures which are not deductible in computing partnership taxable income or loss and which are not capital expenditures.
(4) The basis shall be decreased (but not below zero) by the amount of the partner's deduction for depletion allowable under section 611 for any partnership oil and gas property to the extent the deduction does not exceed the proportionate share of the adjusted basis of the property allocated to the partner under section 613A(c)(7)(D).
(5) The basis shall be adjusted (but not below zero) to reflect any gain or loss to the partner resulting from a disposition by the partnership of a domestic oil or gas property after December 31, 1974.
(6) For the effect of liabilities in determining the amount of contributions made by a partner to a partnership or the amount of distributions made by a partnership to a partner, see section 752 and § 1.752-1, relating to the treatment of certain liabilities. In determining the basis of a partnership interest on the effective date of subchapter K, chapter 1 of the Code, or any of the sections thereof, the partner's share of partnership liabilities on that date shall be included.
(7) For basis adjustments necessary to coordinate sections 705 and 1032 in certain situations in which a partnership disposes of stock or any position in stock to which section 1032 applies of a corporation that holds a direct or indirect interest in the partnership, see § 1.705-2.
(8) For basis adjustments necessary to coordinate sections 705 and 358(h), see § 1.358-7(b). For certain basis adjustments with respect to a § 1.752-7 liability assumed by a partnership from a partner, see § 1.752-7.
(9) For basis adjustments necessary to coordinate sections 705 and 362(e)(2), see § 1.362-4(e)(1).
-
Treas. Reg. §1.705-2Basis adjustments coordinating sections 705 and 1032
(a) Purpose. This section coordinates the application of sections 705 and 1032 and is intended to prevent inappropriate increases or decreases in the adjusted basis of a corporate partner's interest in a partnership resulting from the partnership's disposition of the corporate partner's stock. The rules under section 705 generally are intended to preserve equality between the adjusted basis of a partner's interest in a partnership (outside basis) and such partner's share of the adjusted basis in partnership assets (inside basis). However, in situations where a section 754 election was not in effect for the year in which a partner acquired its interest, the partner's inside basis and outside basis may not be equal. Similarly, in situations where a section 754 election was not in effect for the year in which a partnership distributes money or other property to another partner and that partner recognizes gain or loss on the distribution or the basis of the property distributed to that partner is adjusted, the remaining partners' inside basis and outside basis may not be equal. In these situations, gain or loss allocated to the partner upon disposition of the partnership assets that is attributable to the difference between the adjusted basis of the partnership assets absent the section 754 election and the adjusted basis of the partnership assets had a section 754 election been in effect generally will result in an adjustment to the basis of the partner's interest in the partnership under section 705(a). Such gain (or loss) therefore generally will be offset by a corresponding decrease in the gain or increase in the loss (or increase in the gain or decrease in the loss) upon the subsequent disposition by the partner of its interest in the partnership. Where such a difference exists with respect to stock of a corporate partner that is held by the partnership, gain or loss from the disposition of corporate partner stock attributable to the difference is not recognized by the corporate partner under section 1032. To adjust the basis of the corporate partner's interest in the partnership for this unrecognized gain or loss would not be appropriate because it would create an opportunity for the recognition of taxable gain or loss on a subsequent disposition of the partnership interest where no economic gain or loss has been incurred by the corporate partner and no corresponding taxable gain or loss had previously been allocated to the corporate partner by the partnership.
(b) Single partnership—(1) Required adjustments relating to acquisitions of partnership interest. (i) This paragraph (b)(1) applies in situations where a corporation acquires an interest in a partnership that holds stock in that corporation (or the partnership subsequently acquires stock in that corporation in an exchanged basis transaction), the partnership does not have an election under section 754 in effect for the year in which the corporation acquires the interest, and the partnership later sells or exchanges the stock. In these situations, the increase (or decrease) in the corporation's adjusted basis in its partnership interest resulting from the sale or exchange of the stock equals the amount of gain (or loss) that the corporate partner would have recognized (absent the application of section 1032) if, for the year in which the corporation acquired the interest, a section 754 election had been in effect.
(ii) The provisions of this paragraph (b)(1) are illustrated by the following example:
(2) Required adjustments relating to distributions. (i) This paragraph (b)(2) applies in situations where a corporation owns a direct or indirect interest in a partnership that owns stock in that corporation, the partnership distributes money or other property to another partner and that partner recognizes gain or loss on the distribution or the basis of the property distributed to that partner is adjusted during a year in which the partnership does not have an election under section 754 in effect, and the partnership subsequently sells or exchanges the stock. In these situations, the increase (or decrease) in the corporation's adjusted basis in its partnership interest resulting from the sale or exchange of the stock equals the amount of gain (or loss) that the corporate partner would have recognized (absent the application of section 1032) if, for the year in which the partnership made the distribution, a section 754 election had been in effect.
(ii) The provisions of this paragraph (b)(2) are illustrated by the following example:
(c) Tiered partnerships and other arrangements—(1) Required adjustments. The purpose of these regulations as set forth in paragraph (a) of this section cannot be avoided through the use of tiered partnerships or other arrangements. For example, if a corporation acquires an indirect interest in its own stock through a chain of two or more partnerships (either where the corporation acquires a direct interest in a partnership or where one of the partnerships in the chain acquires an interest in another partnership), and gain or loss from the sale or exchange of the stock is subsequently allocated to the corporation, then the bases of the interests in the partnerships included in the chain shall be adjusted in a manner that is consistent with the purpose of this section. Similarly, if a corporation owns an indirect interest in its own stock through a chain of two or more partnerships, and a partnership in the chain distributes money or other property to another partner and that partner recognizes gain or loss on the distribution or the basis of the property distributed to that partner is adjusted during a year in which the partnership does not have an election under section 754 in effect, then upon any subsequent sale or exchange of the stock, the bases of the interests in the partnerships included in the chain shall be adjusted in a manner that is consistent with the purpose of this section.
(2) Examples. The provisions of this paragraph (c) are illustrated by the following examples:
(d) Positions in Stock. For purposes of this section, stock includes any position in stock to which section 1032 applies.
(e) Effective date. This section applies to gain or loss allocated with respect to sales or exchanges of stock occurring after December 6, 1999, except that paragraph (d) of this section is applicable with respect to sales or exchanges of stock occurring on or after March 29, 2002, and the fourth sentence of paragraph (a), paragraph (b)(2), and the third sentence of paragraph (c)(1) of this section are applicable with respect to sales or exchanges of stock occurring on or after March 18, 2003.
-
Treas. Reg. §1.705-2(a)Purpose.
Purpose. This section coordinates the application of sections 705 and 1032 and is intended to prevent inappropriate increases or decreases in the adjusted basis of a corporate partner's interest in a partnership resulting from the partnership's disposition of the corporate partner's stock. The rules under section 705 generally are intended to preserve equality between the adjusted basis of a partner's interest in a partnership (outside basis) and such partner's share of the adjusted basis in partnership assets (inside basis). However, in situations where a section 754 election was not in effect for the year in which a partner acquired its interest, the partner's inside basis and outside basis may not be equal. Similarly, in situations where a section 754 election was not in effect for the year in which a partnership distributes money or other property to another partner and that partner recognizes gain or loss on the distribution or the basis of the property distributed to that partner is adjusted, the remaining partners' inside basis and outside basis may not be equal. In these situations, gain or loss allocated to the partner upon disposition of the partnership assets that is attributable to the difference between the adjusted basis of the partnership assets absent the section 754 election and the adjusted basis of the partnership assets had a section 754 election been in effect generally will result in an adjustment to the basis of the partner's interest in the partnership under section 705(a). Such gain (or loss) therefore generally will be offset by a corresponding decrease in the gain or increase in the loss (or increase in the gain or decrease in the loss) upon the subsequent disposition by the partner of its interest in the partnership. Where such a difference exists with respect to stock of a corporate partner that is held by the partnership, gain or loss from the disposition of corporate partner stock attributable to the difference is not recognized by the corporate partner under section 1032. To adjust the basis of the corporate partner's interest in the partnership for this unrecognized gain or loss would not be appropriate because it would create an opportunity for the recognition of taxable gain or loss on a subsequent disposition of the partnership interest where no economic gain or loss has been incurred by the corporate partner and no corresponding taxable gain or loss had previously been allocated to the corporate partner by the partnership.
-
Treas. Reg. §1.705-2(b)Single partnership—(1) Required adjustments relating to acquisitions of partnership interest.
Single partnership—(1) Required adjustments relating to acquisitions of partnership interest. (i) This paragraph (b)(1) applies in situations where a corporation acquires an interest in a partnership that holds stock in that corporation (or the partnership subsequently acquires stock in that corporation in an exchanged basis transaction), the partnership does not have an election under section 754 in effect for the year in which the corporation acquires the interest, and the partnership later sells or exchanges the stock. In these situations, the increase (or decrease) in the corporation's adjusted basis in its partnership interest resulting from the sale or exchange of the stock equals the amount of gain (or loss) that the corporate partner would have recognized (absent the application of section 1032) if, for the year in which the corporation acquired the interest, a section 754 election had been in effect.
(ii) The provisions of this paragraph (b)(1) are illustrated by the following example:
(2) Required adjustments relating to distributions. (i) This paragraph (b)(2) applies in situations where a corporation owns a direct or indirect interest in a partnership that owns stock in that corporation, the partnership distributes money or other property to another partner and that partner recognizes gain or loss on the distribution or the basis of the property distributed to that partner is adjusted during a year in which the partnership does not have an election under section 754 in effect, and the partnership subsequently sells or exchanges the stock. In these situations, the increase (or decrease) in the corporation's adjusted basis in its partnership interest resulting from the sale or exchange of the stock equals the amount of gain (or loss) that the corporate partner would have recognized (absent the application of section 1032) if, for the year in which the partnership made the distribution, a section 754 election had been in effect.
(ii) The provisions of this paragraph (b)(2) are illustrated by the following example:
-
Treas. Reg. §1.705-2(c)Tiered partnerships and other arrangements—(1) Required adjustments.
Tiered partnerships and other arrangements—(1) Required adjustments. The purpose of these regulations as set forth in paragraph (a) of this section cannot be avoided through the use of tiered partnerships or other arrangements. For example, if a corporation acquires an indirect interest in its own stock through a chain of two or more partnerships (either where the corporation acquires a direct interest in a partnership or where one of the partnerships in the chain acquires an interest in another partnership), and gain or loss from the sale or exchange of the stock is subsequently allocated to the corporation, then the bases of the interests in the partnerships included in the chain shall be adjusted in a manner that is consistent with the purpose of this section. Similarly, if a corporation owns an indirect interest in its own stock through a chain of two or more partnerships, and a partnership in the chain distributes money or other property to another partner and that partner recognizes gain or loss on the distribution or the basis of the property distributed to that partner is adjusted during a year in which the partnership does not have an election under section 754 in effect, then upon any subsequent sale or exchange of the stock, the bases of the interests in the partnerships included in the chain shall be adjusted in a manner that is consistent with the purpose of this section.
(2) Examples. The provisions of this paragraph (c) are illustrated by the following examples:
-
Treas. Reg. §1.705-2(d)Positions in Stock.
Positions in Stock. For purposes of this section, stock includes any position in stock to which section 1032 applies.
-
Treas. Reg. §1.705-2(e)Effective date.
Effective date. This section applies to gain or loss allocated with respect to sales or exchanges of stock occurring after December 6, 1999, except that paragraph (d) of this section is applicable with respect to sales or exchanges of stock occurring on or after March 29, 2002, and the fourth sentence of paragraph (a), paragraph (b)(2), and the third sentence of paragraph (c)(1) of this section are applicable with respect to sales or exchanges of stock occurring on or after March 18, 2003.
45 Citing Cases
Analysis Section 705 sets out rules for determining the adjusted basis of a partner’s interest in a partnership.
The section 704(d) rules differ from section 705(a) as they distinguish between allowed or disallowed losses. Section 705(a) does not make such a distinction.
See §§ 705, 722, 733, 752; see also Rawls Trading, L.P. v. Commissioner, 138 T.C. 271, 275 n.10 (2012). A partner’s contribution of a promissory note to a partnership in which he is a partner does not increase the partner’s outside basis. See VisionMonitor Software, LLC v. Commissioner, T.C. Memo. 2014-182, at *10 (and cases cited thereat). The amount o
A partner's basis in a partnership is generally determined under section 705, captioned "Determination ofBasis ofPartner's Interest." Upon formation on January 1, 2008, SRM's basis in DCA presumably equaled Steven's basis in DCA.
at 258 (codified as amended at 42 U.S.C. sec. 2000e- (continued...) - 8 - [*8] Appeals in its current form exists pursuant to section 7804(a), which provides: SEC. 7804(a). Appointment and Supervision.--Unless otherwise prescribed by the Secretary, the Commissioner ofInternal Revenue is authorized to employ such number ofpersons
Partnership Income Under section 702(a) a partner must recognize his distributive share of partnership income or loss; such recognition is reflected in the partner's adjusted basis in his partnership interest pursuant to section 705(a).
Although a partner's basis in a partnership may include the adjusted basis ofproperty, basis does not include the value ofservices performed unless and until the value ofthose services has been subjected to taxation. Haffv. Commissioner, T.C. Memo. 2015-138, slip op. at *5 (citing Hutcheson v. Commissioner, 17 T.C. 14, 19 (1951)). Accordi
Under section 705 a partner's basis generally is composed ofcontributions to the partnership, s_e_e sec. 722, plus his or her distributive share ofpartnership income, see sec. 703(a), less distributions and his or her distributive share ofpartnership losses or expenditures, see sec. 733; sec. 1.705-1(a)(2), Income Tax Regs. Basis does not include the val
In addition, any liquidating or nonliquidating distribution would also affect the partner's adjusted basis in his partnership interest. See generally sec. 733. Aside from the unsigned partnership return for Nexes for 2004 and some scattered documents relating to Nexes that are irrelevant to our inquiries under sections 705 and 733, petiti
tatice, inflating the outside basis ofa partnership--the partnership that woùld become the . ó tinued (p oviding that the basis ofa partner's partnership interest is decreased to the extent ofthe partner's decreased share ofpartnekship liabilities); sec. 705 (providing rules for subsequent adjustmentsto the basis ofa partrier's partnership interest, following its.initial determination at the time oforiginal acquisition to reflect the partner(cid:0)541hipo'speratiiig results and the partner's dis
t is increased to the extent ofthe partner's increased share ofpartnership liabilities); sec. 752(b) (providing that the basis ofa partner's partnership interest is decreased to the extent ofthe partner's decreased share ofpartnership liabilities); sec. 705 (providing rules for subsequent adjustments to the basis ofapartner's partnership interest, following its initial determination at the time oforiginal acquisition, to reflect the partnership's operating results and the partner's distributive
increased to the extent of the partner’s increased share of partnership liabilities); sec. 752(b) (providing that the basis of a partner’s partnership interest is decreased to the extent of the partner’s decreased share of partnership liabilities); sec. 705 (providing rules for subsequent adjustments to the basis of a partner’s partnership interest, following its initial determination at the time of original acquisition, to reflect the partnership’s operating results and the partner’s distributi
The basis of an interest in a partnership acquired by a contribution of property, including money, is the amount of money and adjusted basis of such property to the partner at the time of contribution, increased by the amount of any gain recognized under section 721(b) at the time. Sec. 722. Any increase in a partner’s share of liabilitie
705 details how to calculate basis. Specifically, a partner’s basis in his partnership interest is increased by, inter alia, the amount of his distributive share of taxable income. Sec. 705. Thus, to the extent petitioner recognized additional income as a result of the adjustment to Tri-City, he is also entitled to an upward adjustment of his
Respondent argues that in a situation such as this one, it is appropriate to apply the alternative rule se: forth in the regulations under section 705 to determine Russell's adjusted basis in his partnership interest.
Respondent argues that in a situation such as this one, it is appropriate to apply the alternative rule set forth in the regulations under section 705 to determine Russell’s adjusted basis in his partnership interest.
- 8 - Moreover, the legislative history states, generally, that the basis adjustment rules are analogous to those provided for partnerships under section 705 and require that the basis of a shareholder in an S corporation will be adjusted for income and losses for any corporate tax year before the distribution rules apply for that year.
income and deductible and nondeductible expenses will serve, respectively, to increase and decrease a subchapter S shareholder's basis in the stock of the corporation. These rules generally will be analogous to those provided for partnerships under section 705. Under these rules, income and loss for any corporate taxable year will apply to adjust basis before the distribution rules apply for that year. * * * [Emphasis added.] H. Rept. 97-826, at 17 (1982); 1982-2 C.B. 730, 738; S. Rept. 97- 640
income and deductible and nondeductible expenses will serve, respectively, to increase and decrease a subchapter S shareholder’s basis in the stock of the corporation. These rules generally will he analogous to those provided for partnerships under section 705. Under these rules, income and loss for any corporate taxable year will apply to adjust basis before the distribution rules apply for that year. * * * [H. Rept. 97-826, at 17 (1982); 1982-2 C.B. 730, 738; S. Rept. 97-640, at 18 (1982); 19
Moreover, the legislative history states, generally, that the basis adjustment rules are analogous to those provided for partnerships under section 705 and require that the basis of a shareholder in an S corporation will be adjusted for income and losses for any corporate tax year before the distribution rules apply for that year.
nt he received. Sec. 731. See Harris v. - 1100 - Commissioner, T.C. Memo. 1988-195; Lynch v. Commissioner, T.C. Memo. 1982-305; Abraham v. Commissioner, T.C. Memo. 1970-304. A partner's adjusted basis in his partnership interest is determined under section 705. A partner's initial basis in a partnership is determined by the amount of money contributed and the adjusted basis of any other type of property contributed. Sec. 722. The partner's basis in the partnership is then adjusted upward for the