Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

So I have full understanding of outside basis - Outside

So I have full understanding...
So I have full understanding of outside basis - Outside basis stops at zero each year even if the current year K1 Box 1 ordinary loss pushes this basis below zero. It is understood that the loss amount allowed to be taken is up to amount of outside basis. So if a contribution is made each year, the loss amount can be up to the amount contributed in the current year despite past year losses driving it below zero?
Show More
Show Less
Ask Your Own Tax Question
Answered in 25 minutes by:
10/1/2013
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,843
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Lane :

No, as a practical matter, outside basis should be tracked yearly because basis is an accumulated amount from prior and current years and it may be difficult or impossible to compile the needed data when necessary.

Lane :

Generally, a partner’s outside basis starts with the partner’s initial basis in the partnership interest, and is adjusted for: (a) all subsequent contributions by the partner; (b) the partner’s share of the taxable income or loss of the partnership; (c) the partner’s share of the nontaxable income and nondeductible/non-capital expenses; and (d) the distributions from the partnership --up to the date that basis is determined

Lane :

And, of course, basis determination must be made whenever there is a possibility of a taxable event

Lane :

Also, any receipt of a partnership interest by providing services to the partnership is initially taxed as the receipt of compensation at fair market value, and this value becomes the opening basis in the interest.

Lane :

With respect to determining the gain or loss from the partial or complete disposition of the partnership interest, and with respect to determining the basis of any property received from the partnership as property distributions, outside basis should be determined immediately prior to the disposition or the distribution of the property.

Lane :

Increases in the partner’s share of partnership liabilities generally are treated as cash contributions by the partner, while decreases are treated as cash distributions to the partner. Complex rules govern the allocation of liabilities to partners.

Lane :

Outside basis adjustments are required on the date that contributions of property are made.

Lane :

And, likewise, adjustments are generally required on the date that distributions take place.

Lane :

There is an important exception for distributions that are merely advances or drawings against a partner’s distributive share of income for that year: these are treated as current distributions made on the last day of the partnership’s taxable year.

Lane :

But, to answer your question: ... And this is a LITTLE different from the way you expressed it, it's not that it stops at zero each year ... It's NEVER reduced below zero

Lane :

See this, from AICPA:

Lane :

The partner’s initial basis is determined pursuant to Internal Revenue Code1 sections 722 or 742 depending on how the partner acquired the interest (i.e. by contribution or by acquisition). First, the initial basis is increased under section 705(a)(1) for (a) subsequent contributions, and (b) the partner’s share of the partnership taxable and tax-exempt income. Then, the partner’s basis is decreased under sections 705(a)(2) and (a)(3) by (a) the amount of cash distributions and (b) the adjusted basis of any property distributions. The partner’s outside basis is further reduced by the partner’s share of the losses and non-deductible/non-capital expenses. Outside basis is never reduced below zero.


id="sdfootnote1">

1 All references to the word “section” in this guide reference the Internal Revenue Code unless otherwise noted.


Lane :

Sory for the data dump, but I wanted to give this to you context, and give you something for the files

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Lane :

Hope this has helped

Lane :

Lane

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,843
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now


Hi Peg,

Finally had a chance to dig in a little.

Of this one, I'm sure

Lane

Ask Your Own Tax Question

As I was trying to look at this las night I stumbled into this.

An excellent overview:

https://app.box.com/s/3zekpxqqlecxbvk4opui

Lane
Ask Your Own Tax Question

Thanks Peg,

Sorry it took this long.

(Learning is good)!

Lane
Ask Your Own Tax Question
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,843
12,843 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Suppose my taxable income in 220,000 this year and the tax
Suppose my taxable income in 220,000 this year and the tax rate is X up to 200K, but Y for 200and over, do I pay Y on the full 220K or just that above 200K? … read more
Lane
Lane
JD, CFP, MBA, CRPS
12,843 satisfied customers
Under current law a 100,000 taxable income pays $10,365 plus
Under current law a 100,000 taxable income pays $10,365 plus 25% of the amount exceeding $79,400 i.e. about $16,000. Under tax reform will the tax be $25,000? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I have an LLP (limited liability partnership) with an
I have an LLP (limited liability partnership) with an operating agreement that indicates it's organized as a general partnership. I am the designated 'tax matters partner'. The *other* partner is resp… read more
abci168
abci168
Principal
27 satisfied customers
Question regarding taxation of partnership distributions and
Hi, question regarding taxation of partnership distributions and capital gains … read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,310 satisfied customers
If your taxable income is $0 (actually negative) is there a
If your taxable income is $0 (actually negative) is there a penalty for late filing? Do you need to file at all? What is the 2016 filing deadline with an extension?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,444 satisfied customers
I (US person) own 50% in a foreign partnership (real estate
I (US person) own 50% in a foreign partnership (real estate partnership under civil law (GbR) in Germany), the other 50% are held by a none US person. - I have rental income from the foreign partnersh… read more
taxmanrog
taxmanrog
Master\u0027s Degree
697 satisfied customers
Is an inheretance taxable income. What do you want to know?
What do you want to know? My question: is an inheritance a taxable income? … read more
abci168
abci168
Principal
27 satisfied customers
Sell of property tax liability. Ca. Bought home 25 yrs ago
bought home 400,000 selling 2.5 mil. Invested 500,000 owe 800,000… read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,310 satisfied customers
I'm trying to figure out how a partnership "deducts"
I'm trying to figure out how a partnership "deducts" contributions to a partner's retirement plan … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
In a partnership can you distribute the loss, different then
In a partnership can you distribute the loss, different then the actual % of each partner? … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
Tax question - Form 1099, Line 8 Tax Exempt Interest
Tax question - Form 1099 , Line 8 Tax Exempt Interest reflects $500; OID 1099 is 0. Under heading Detail for tax exempt interest it says tax exempt interest is $300. Under Detail for Tax Exempt OID it… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
717 satisfied customers
Is Worker's Compensation payment to be added as income? I
Is Worker's Compensation payment to be added as income? … read more
Lane
Lane
JD, CFP, MBA, CRPS
12,843 satisfied customers
A friend receives taxable income that he can characterize
A friend receives taxable income that he can characterize EITHER as self-employment or non-SE. If he chooses the SE route, it will increase his Social Security payment, almost immediately as he is on … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
Undistributed taxable income previously taxed. Have 3
Undistributed taxable income previously taxed. Have 3 shareholders with balances due to them from previous years. Can it be paid all in one year to bring their amounts owing to zero until the next pro… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
Rules on Rollovers (Return of a non-taxed IRA Distribution).
Rules on Rollovers (Return of a non-taxed IRA Distribution). Over 70-1/2 years old) … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
A limited liability partnership was owned by a trust cfeated
A limited liability partnership was owned by a trust cfeated by the former owner. At the former owners death, the trust required termination of the trust distribution of the partnership interest equal… read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
ON A 1041 FORM IS THE TAX FIGURED ON ADJUSTED TOTAL INCOME
STEPHANIE, ON A 1041 FORM IS THE TAX FIGURED ON ADJUSTED TOTAL INCOME MINUS THE 4050 EXEMPTION? … read more
Lane
Lane
JD, CFP, MBA, CRPS
12,843 satisfied customers
Deductible unreimbursed partnership expenses are deductible
Deductible unreimbursed partnership expenses are deductible on Line 28 of Schedule E. In this case the expense is a tractor with a cost of $ 25,000.00. This is a depreciable asset and would not normal… read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x