Partner’s Outside Basis in Partnership
Client:______________________________________________________ % of Ownership _________
Howe interest acquired: Purchase $______
Date
______
Section 721 $______
Date
______
Inheritance of Gift $ ______
Date
______
Step 1 – Additions to Basis
1. Initial or basis from prior year
$______
Share of all liabilities from prior year $ ______
2. Partner’s contribution to capital (cash, property or services)
_______
3. Current year’s ordinary income from K-1, line 1 and other income (2 & 3)
______
4. Separately stated items of income (see K-1)
_______
a) Interest
$
b) Dividends
$
c) Royalties
d) Net short-term Gain
e) Net long-term Gain
f) Other Portfolio Income
g) Nest Section 1231 Gain
h) Other Income
i) CODI income
5. Add: Lines 4 a) through 4 h)
______
6. Excess depletion deduction – depletion over cost basis
_____ Remaining
7. Increase in share of all liabilities
______ Basis
8. Other increases or adjustment – Identify ______________
______ Not Less
9. Add: Lines 1, 2, 3, 5, 6, 7 and 8
$______ than zero
Step 2 – Decrease in Basis – Liabilities and Distributions
10. Decrease in partner’s share of all liabilities (Subtract line 10 from line 9)
$______ $______
11. Distribution (cash or property (lesser of parnership’s basis or remaining
Outside basis)]
Subtract line 1] from line 10(B). If line 11(B) is negative, report gain from
Distribution in excess of basis (treated as capital gain)
$______ $______
Caution: A cash distribution is tax-free up to outside basis, but if over basis, the excess is treated as a
capital gain. The only other time a current cash distribution is taxable is when Section 751(a) applies
(disproportionate distribution with substantially appreciated inventory or unrealized receivables). A
property distribution is not taxable unless it is a disproportionate distribution under Section 751(b)
[not a pro rata distribution or 704(c) applies (original partner 7-year rule)[.
Step III – Income Tax-Reductions in Basis for Current Year
12. Current year’s loss from K-1, line 1 and other losses (lines 2 and 3)
$______
13. Separately stated items of loss and deduction (see K-1)
a) Net Short-Term Loss _________
b) Net Long-Term Loss _________
c) Other Portfolio Losses _________
d) Section 1231 Loss _________
e) Section 179 Expensing _________ f) Charitable Contri. _________
g) Investment Interest
_________
14. Add: Lines 13 a) through 13 g)
______
15. Deduction for percentage depletion – Oil and gas wells
______
16. Annual business credits to extent reduction in assets basis under 50(c)
______
17. Nondeductible partnership expenses that are not capital expenditures
______
a) 20% Disallowed T & E _________ b)Penalties & Fines
_________
c) Tax-Exempt Income Exp. _______ d)Partner’s Life Ins
_________
e) Club Dues
________
18. Add: Lines 17 a) through 17 e)
______
19. Other deductions or adjustments: Add amounts paid that would be itemized
Deductions on Form 1040 Payments for partners’ medical & dental, etc,
a) _______, IRA ______, Keogh or SEP b) ______, other c) ______
______
20. Add: Lines 12, 14, 15, 18 and 19
______
21. Adjusted basis at end of year (not less than zero): Subtract line 20 from line 11(B)
$
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22. Partner’s share of all liabilities – Total liabilities
$ ______x_____% = $ _______