E

#### e patashnikov

the two concepts differ. Shouldn't a partner's basis in his/her

partnership interest equal his/her equity?

E

the two concepts differ. Shouldn't a partner's basis in his/her

partnership interest equal his/her equity?

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D

here are three items. Partner's capital, basis, and ate patashnikov said:

the two concepts differ. Shouldn't a partner's basis in his/her

partnership interest equal his/her equity?

risk. They are NOT the same. Without spending all week

writing about it, your capital is your share of your net

partnership contributions, distributions, and items of

income and loss. Basis MAY start with capital (and it might

not) but will also include a partner's share of partnership

liabilities, and at risk is generally adjusted to include a

share of non-recourse liabilities. This is far from a

complete explanation and I'm sure I may have mixed up basis

and at risk, but I hope you see that capital is not

necessarily basis.

A

Usually upon formation the two are the same, but if ae patashnikov said:

the two concepts differ. Shouldn't a partner's basis in his/her

partnership interest equal his/her equity?

partner sells his interest to an outside party the new

partner would have a basis in his partnership interest

(outside basis) of the price he paid. However, his basis in

the partnership assets (inside basis) would be the same as

the seller's share was.

B

I would differ with your statement. I have numerousUsually upon formation the two are the same, but if a

partner sells his interest to an outside party the new

partner would have a basis in his partnership interest

(outside basis) of the price he paid.

partnerships that involve contributed property. Typically a

partner that contributes property other than cash has a

capital account that is credited with the value of that

property, not the tax basis. If A and B form a partnership

with A contributing land with basis of $100 and value of

$1,000 and B contributing cash of $1,000, they will each be

credited with $1,000 in their capital account. While A's

capital account would be $1,000 his basis is only $100.

Brian Bivona

A

True, but he did not ask about the capital account BALANCE,I would differ with your statement. I have numerous

partnerships that involve contributed property. Typically a

partner that contributes property other than cash has a

capital account that is credited with the value of that

property, not the tax basis. If A and B form a partnership

with A contributing land with basis of $100 and value of

$1,000 and B contributing cash of $1,000, they will each be

credited with $1,000 in their capital account. While A's

capital account would be $1,000 his basis is only $100.

he asked about its tax basis, and as you pointed out these

are not the same. The tax basis to the partnership of a

tax-deferred contribution of a capital asset is the same as

the partner's basis before contribution (§723). The partner

gets a substituted basis in his/her partnership interest. At

this point we have two assets, the property in the hands of

the partnership and the partner's interest in the

partnership. Both have the same basis (inside and outside

basis). If the partner sells the partnership interest, the

inside basis of the contributed property does not change,

but the buyer's basis in the partnership interest is what

was paid. At this point the inside and outside basis is

different.

D

Actually he asked about the difference between basis in aTrue, but he did not ask about the capital account BALANCE,

he asked about its tax basis, and as you pointed out these

are not the same. The tax basis to the partnership of a

tax-deferred contribution of a capital asset is the same as

the partner's basis before contribution (§723). The partner

gets a substituted basis in his/her partnership interest. At

this point we have two assets, the property in the hands of

the partnership and the partner's interest in the

partnership. Both have the same basis (inside and outside

basis). If the partner sells the partnership interest, the

inside basis of the contributed property does not change,

but the buyer's basis in the partnership interest is what

was paid. At this point the inside and outside basis is

different.

partnership interest and equity in the interest. Since

equity has little meaning in tax law in this context, one

can reasonably assume he was referring to the capital

account. As the previous poster noted, if one contributes

appreciated property to a partnership, there is an immediate

difference between the partner's capital account and the

partner's basis in the interest.

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B

I agree completely with your analysis. However, when theTrue, but he did not ask about the capital account BALANCE,

he asked about its tax basis, and as you pointed out these

are not the same. The tax basis to the partnership of a

tax-deferred contribution of a capital asset is the same as

the partner's basis before contribution (§723). The partner

gets a substituted basis in his/her partnership interest. At

this point we have two assets, the property in the hands of

the partnership and the partner's interest in the

partnership. Both have the same basis (inside and outside

basis). If the partner sells the partnership interest, the

inside basis of the contributed property does not change,

but the buyer's basis in the partnership interest is what

was paid. At this point the inside and outside basis is

different.

question was asked about basis equalling "equity" I was

assuming that, as used, the term was referring to book

capital. Book capital (which normally controls who gets

liquidation proceeds) typically begins with the fair market

value of contributed property. While inside and outside tax

basis may be the same, tax basis and book capital are not.

I may have misread what was intended by the original poster.

Brian Bivona

A

The original question was a little convoluted, the body didquestion was asked about basis equalling "equity" I was

assuming that, as used, the term was referring to book

capital. Book capital (which normally controls who gets

liquidation proceeds) typically begins with the fair market

value of contributed property. While inside and outside tax

basis may be the same, tax basis and book capital are not.

I may have misread what was intended by the original poster.

say "equity" but the subject header seemed a little more

detailed with "Partner's Tax Capital Account Basis," which I

read as partner's capital account tax basis... but who

knows!

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