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Partnership Outside Basis Calculator (Sections 705 and 704(d))

Is the practice earning what it should for the hours it spends?

Partner basis after income, distributions and losses, gain on cash distributions above basis, loss allowed and loss suspended.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Ending basis of partnership interest
$0
Outside basis after income, distributions and losses
Loss allowed this year
$22,000
Loss suspended under section 704(d)
$8,000
Allowed in a later year when basis is restored
Drawn to one scale
Ending basis of partnership interest$0
Loss allowed this year$22,000
Loss suspended under section 704(d)$8,000
Gain on cash distributions above basis$0
All results
MeasureResult
Ending basis of partnership interest$0
Loss allowed this year$22,000
Loss suspended under section 704(d)
Allowed in a later year when basis is restored
$8,000
Gain on cash distributions above basis
Section 731(a)(1)
$0
How this was worked out
Work shownrecomputed as you type
Basis before distributions = beginning + taxable income + tax-exempt income
Distributions reduce basis; cash above basis is gain
Then nondeductible expenditures reduce basis
Loss allowed = min(loss, remaining basis); the rest is suspended

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Basis before distributions = beginning + taxable income + tax-exempt income
  • Distributions reduce basis; cash above basis is gain
  • Then nondeductible expenditures reduce basis
  • Loss allowed = min(loss, remaining basis); the rest is suspended

How it works

Section 705 starts with basis from contribution or purchase, adds the partner share of taxable and tax-exempt income, and subtracts distributions, the share of losses and nondeductible expenditures, not below zero. Section 704(d) allows a loss only up to the adjusted basis at the end of the partnership year, and the excess is allowed in a later year.

Cash distributed above basis immediately before the distribution is gain under section 731(a)(1). For the loss limit, Treas. Reg. 1.704-1(d)(2) first increases basis under section 705(a)(1) and decreases it under section 705(a)(2) for everything except losses, so the tool applies increases, then distributions, then nondeductible expenditures, and tests the loss last. The gain test treats the cash as distributed at year end, which fits draws and advances against the distributive share (Treas. Reg. 1.731-1(a)(1)(ii)); a mid-year distribution is measured against basis at that date. Partnership liabilities are not modeled, so include any liability share in your beginning basis if it applies.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Are partnership liabilities in basis?

This tool does not compute them. Include your liability share in the starting amount if it applies to you.

What happens to the suspended loss?

It is allowed at the end of a later partnership year in which basis is restored.

Are other loss limits applied?

No. This tool applies only the basis rules in sections 705, 704(d) and 731.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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