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

Question

Quizplus · Accepted Answer

The partner's basis in the partnership interest is adjusted for several items, including the decrease in partnership liabilities. This is because as liabilities decrease, the partner's share of the partnership assets increases, which in turn increases their basis in the partnership interest. Adding capital losses or partnership operating losses would decrease the partner's basis, which is not a correct adjustment. Subtracting tax-exempt income would also not be a correct adjustment since tax-exempt income is not subject to taxation and therefore does not affect the partner's basis.

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