Partnership Basis

A partners basis in a partnership upon creation is the combination of cash, property and services contributed. A partners basis increases with cash contributions or increases in liabilities assumed by the partnership, and the distributive share of income. Basis decreases occur when money is paid to partners, liabilities decrease or distributive losses are incurred. Basis is also decreased with non-deductible expenses and section 179 expenses that are disallowed on the personal return.

A partners capital is usually tracked on the K-1 on a tax basis, unless the partnership has a GAAP balance sheet which is required when a M-3 is used.