What does a taxpayers "tax basis" represent and what is its importance to that partner?
A taxpayer's tax basis in a partnership interest (called partner's outside basis)represents the partner's cost for tax purposes and is used to determine and calculate the following;
1.Determine the taxable gain or loss upon disposition of a partnership interest.
2.Limit the partner's ability to deduct a partnership loss.
3.Determine the extent in which cash distributions are tax-free instead of taxable.
4.Determine the basis of property received as a distribution.