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Abstract: 

Partners’ distributive share and basis determination rules made it possible to transfer a partner’s built-in loss to another partner or to recognize the same loss more than once. Proposed regulations have been issued to implement restrictions on partners’ ability to shift and duplicate these losses. The regulations introduce basis adjustments for built-in-loss property contributed to a partnership similar to the basis adjustments in Code Sections 734 and 743. This article analyzes the approach taken by the regulations for mandatory basis adjustments when loss property is contributed to the partnership, distributed to partners by the partnership, or otherwise transferred by a partner or the partnership.

Keywords: partnership built-in loss, partnership basis adjustments, IRC Sec. 704(c)(1)(C) property, substantial basis reduction, substantial built-in loss

Affiliations:  1: Wichita State University.