Section 5: 23–33%R19
Partnerships
Exam Insight
Partnership taxation is the most basis-intensive topic on REG: a partner's outside basis absorbs liabilities, drives loss deductibility, and determines gain on distributions. Master the basis formula and most partnership questions fall into place.
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What AICPA Wants You to Know
- 1Apply §721 tax-free formation and identify the service and liability exceptions
- 2Distinguish inside basis from outside basis
- 3Compute a partner's outside basis including the share of liabilities
- 4Identify separately stated items and treat guaranteed payments correctly
- 5Apply distribution rules for nonliquidating and liquidating distributions
- 6Recognize §751 hot assets on the sale of a partnership interest