IRS Practice Unit: Calculating a Partner’s Outside Basis (IRC §705)

Understanding key concepts in order to properly calculate a partner’s outside basis, the IRS Large Business and International Concept Unit outlined in a practice unit released June 10. The rules regarding the computation of outside basis apply to all types of partners including general partners, limited partners, and limited liability company (LLC) members, the IRS noted. Computing a partner’s outside basis is necessary when determining: (1) the maximum amount of any deduction or loss that passes through to the partner; (2) the gain or loss from the disposition of a partnership interest; (3) the tax consequences of cash distributions; and ...