Partnership Basis: Inside & Outside

Author: Jane Ryder

Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2027 to receive credits. NOTE: Go to My Professional Profile in your CCH CPELink account settings to ensure your name, and PTIN number; matches your PTIN card

Partnership basis calculations, inside and outside are current IRS targets and offer substantial tax savings for partner loss utilization and reducing tax on excess distributions or on the sale of a partnership interest. Both the individual and the business tax preparer need strong basis reporting skills related to the many components of basis; allocating profit, losses, and other Schedule M-1 adjustments, partnership contributions, loans to the partnership, loan guarantees, distributions, partner benefits, sale of a partnership interest, distributions of partnership assets and more. Basis is the first of four loss limitations a partner is subject to before benefiting from pass-through losses on their individual taxes, if the basis is wrong the partner may miss a valid pass-through loss, overpay taxes on distributions or on the sale of a partnership interest, and may even have a weaker position when negotiating a partnership buy out and possibly be exposed to compliance and audit risk.

Publication Date: August 2024

Designed For
Business and individual tax practitioners with partnership or partner clients.

Topics Covered

• Partnership basis inside and outside
• Schedule K-1, Item L, Partner's Capital Account Analysis
• Tax Basis Capital Accounts for New Partners
• K-1 Loss Limitations for Partners
• Affect of contributing or distributing assets to partners
• Recent Changes to Tax Treatment of Partnerhsip Deductions
• Taxable Distributions in Excess of Basis
• Original Basis of a Partnership Interest
• Basis of Partnership Interest Acquired by Contribution of Services
• Partner's Share of Liabilities Provides Basis
• Schedule K-1, Item K, Reporting a Partner's Share of Liabilities
• Nonrecourse Liabilities
• General Rules for Amounts Not At-Risk
• General Rules for Passive Activity Losses
• Partnership Distributions
• Guaranteed Payments Related to Basis
• Unreimbursed Partnership Expenses
• Debt-financed Partnership Acquisition or Contribution
• Alternative Rule for Calculating Basis
• COVID-19 Benefits to be Reported on Form 1065
• ERC Refunds Cause a Basis Problem
• Tax Planning for Partnership Losses
• Partner's Adjusted Basis Worksheet

Learning Objectives

• Describe how to calculate and track accurate inside and outside partnership basis
• Explain how to develop tax strategies to maximize utilizing pass through losses
• List and describe the items which make up basis from initial investment to the final buy out
• Explain how to maintain important worksheets to substantiate basis records or re-construct missing basis records
• Explain the tax implications of contributing or taking assets out of the partnership

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
None

Advance Preparation
None