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Old 01-02-2013, 08:09 PM
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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.

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