In determining a partner's basis in the partnership interest, which of the following reflects a correct adjustment?

Question

Quizplus · Accepted Answer

When determining a partner's basis in a partnership interest, adjustments are made to the initial basis. One adjustment that must be made is to subtract the partner's share of any decrease in the partnership's liabilities. This is because as the partnership pays off its debts, each partner's share of the partnership's liabilities decreases, which in turn increases their basis in the partnership interest. The other options listed here are not correct, as capital losses would decrease the partner's basis, tax-exempt income would not affect the basis, and a partnership operating loss would similarly decrease the partner's basis.

In Determining a Partner's Basis in the Partnership Interest, Which