[nk522]

I am using Becker to study for REG, but decided to watch a few Roger videos today on Partnerships. Becker doesn’t stress “outside” and “inside” basis as much as Roger does, so now I am completely confused. I can imagine the concepts to be simple but at this point my brain is just fried out from all this material. Can someone please dumb down the concept of “outside” & “inside” basis for me please???

[Wannafree]

Inside basis is for Partnership ( FMV ).Say you contributed $10 basis land to P/S and fair value of land is $50.Inside basis for firm on land would be $50.
Outside basis for you would be $10 ( your NBV ).
Now say (next day ) you sell that land for $50 (FMV ),You will recognize gain of ( FMV or sale price ) minus your outside basis ( not inside basis) = 50-10 = $40.
Inside basis is for partnership firm ,outside basis is for partner ( same asset ).

[Wannafree]

two partners calculation of basis :
Say you contributed $10 basis land to P/S and fair value of land is $50.Inside basis for firm on land would be $50.Another partner contributed $50 ( NBV and FNV same) land to firm.Total inside basis for form would be 100 ( your FMV $50 and another partner's FMV 50 ) and your outside basis would be $10 and your partner's basis would be $50 ( his NBV which is same as FMV ).

Tomorrow again both land is sold : your gain would be (50 -10 ) = 40 and partner's gain would be Zero (50-50).

[nk522]

@Nath- what about in terms of mortgage for example? Would the amount of liabilities assumed by the other partners be added to inside or outside basis or both? – that's the thing that's confusing me the most, sorry should've probably clarified that in my original post

[Wannafree]

It will be reduced from outside basis .
Say you you contributed asset of $80 and mortgage of $30 on it.(three partners including you ).
30/3 = 10 each partner assumed ( including you ).
Two ways you can calculate outside basis for partner nk52.
1.$80 + $10 -$30 = $60.
2.$80- $20 ( assumed by other partners ) = $60.
Your asset was 80 and others took 20 , your outside basis is (80-20 =60).

[nk522]

@Nath- Thank you!!

[Wannafree]

You are welcome.

[Skynet]

In an “Inside Partnership” it's just you and the wife.

An “Outside Partnership” is not permitted according the wife, so that Poker night is a No No.

It's OK for the Wife to have “Girls Night Out” Outside Partnership though.

[Author]

Replies