When a partnership borrows money from a financial institution, the tax basis of each of the partners increases.

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When a partnership borrows money, the loan proceeds are added to the partnership's basis. Since each partner's basis in the partnership is a reflection of their share of the partnership's assets and liabilities, the increase in liabilities (from the loan) increases each partner's individual basis in the partnership.

When a Partnership Borrows Money from a Financial Institution, the Tax