Liabilities cannot exceed basis of property transferred into partnership unless partner realizes a taxable gain. Liabilities of the partnership are always considered a part of the individual partner's tax basis. This is mainly because of general liability of partner. Recourse Debt - partners are personally liable. All untaxed gains are taxed to contributing partner because of mandatory allocation.
Basis is computed at the partnership's year end.
9. plus partner's proportionate share of any increase in partnership liabilities 10. The assets may be acquired by the partnership in a taxable purchase. The assets may be retained by the partners and leased to the partnership. The contributing partner could contribute assets with a market value in excess of the basis of the capital interest. Overall limitation - partner can only deduct losses to extent of partner's tax basis in the partnership as determined at end of partnership's taxable year.