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Partnership Basis vs Stock Basis in S-Corps

As with S corporations, we track a partner's basis in his or her partnership interest (otherwise known as the outside basis) as a measurement of the amount of post-tax investment that the partner has in the partnership.

Do we calculate and adjust a partner's outside basis in the same way that we calculate S corporation shareholder's stock basis?

If there are any differences, what are the justifications for the differences?

Solution Preview

The IRS explains how to determine partnership basis: "Upon formation of the partnership, a partner's initial outside basis will generally equal the amount of money and the adjusted basis of property contributed. If the partner purchases his/her partnership interest, the outside basis will equal the purchase price. Additionally, a partnership interest may be acquired by means of an inheritance or a gift," (IRS, 2008). Determining ...

Solution Summary

Describes how to calcuate stock and inside/outside basis for both partnerships and S Corporations. APA format with references included.