How does additional debt or relief of debt affect a partner's basis?
A)Debt has no effect on a partner's basis.
B)Relief of debt increases a partner's basis.
C)Both additional debt and relief of debt increase a partner's basis.
D)Additional debt increases a partner's basis.

Question

Quizplus · Accepted Answer

Additional debt allocated to a partner increases the partner's basis in the partnership. This is because the partner is considered to be at economic risk for the repayment of the partnership's liabilities, which increases their investment in the partnership. Relief of debt, on the other hand, would decrease a partner's basis, as it reduces the partner's economic risk in the partnership.

How Does Additional Debt or Relief of Debt Affect a Partner's