Which of the following statements regarding a partner's tax basis in a partnership interest is true?
A) Partnership tax basis is increased annually by cash distributions from the partnership.
B) Partnership tax basis is reduced by the partner's share of nondeductible partnership expenses.
C) Partnership tax basis is reduced by the partner's share of nontaxable partnership income.
D) Partnership tax basis becomes negative if allocable losses exceed basis.

Question

Quizplus · Accepted Answer

A partner's tax basis in a partnership interest is initially determined by the amount contributed to the partnership and adjusted annually for the partner's share of partnership income, deductions, gains, losses, and distributions. The tax basis is reduced by the partner's share of nondeductible partnership expenses, which are expenses that cannot be deducted in calculating the partnership's taxable income.

Which of the Following Statements Regarding a Partner's Tax Basis