A partner's tax basis in his or her partnership interest is decreased by partnership distributions.

Question

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When a partner receives a distribution from the partnership, the partner's tax basis in his or her partnership interest is decreased by the amount of the distribution. This means that if the partner sells his or her interest in the partnership, the tax basis used to calculate the gain or loss on the sale will be reduced by the amount of the distributions that have been received.

A Partner's Tax Basis in His or Her Partnership Interest