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Partner's basis in partnership interest

grace_889 — Sun, 07 Mar 2021 04:27:43 GMT

I purchased 100% of a partnership interest by paying cash $1000 to the selling partner personally. . His capital account in the partnership was $350. What was my basis of interest in the partnership from the beginning? Do I use $1000 or $350? Pls advise!

Re: Partner's basis in partnership interest

Mike9241 — Sun, 07 Mar 2021 07:33:33 GMT

this may seem confusing but there is inside basis - what the partnership shows and outside basis. what you paid +/- your share of profit loss - distributions. now if there are depreciable assets or maybe goodwill the partnership may make a 754 election so you can get a depreciation deduction for the difference between the $1,000 you paid and the $350 shown on the partnership books. since this seems like your new at doing partnership returns I strongly suggest you use the services of a tax pro the first year. mess up and you'll have a never ending problem on your hands. Also, TurboTax does not do basis calculations.

Re: Partner's basis in partnership interest

grace_889 — Mon, 08 Mar 2021 03:34:59 GMT

Hi, Mipatke9241: The partnership does not hold any depreciable assets, instead has one patent and some know how. I know the basis for my interest in partnership is $1000. But how do I align my outside basis of $1000 with my inside basis of $350 by making what election? Section 743(B) , 734(b) and section 754 election? Since I don't have depreciated properties, do I adjust the basis of patent and goodwill? Really appreciate your further explanations. I am an accountant professional who was puzzled by these. Thank you!