@CPAchronicles C Corporations use the greater of assumed liabilities or adjusted basis when determining the corporation's basis in the asset. The way I think of it is excess liabilities over partner's adjusted basis = boot, and any cash received by the partner = boot. Corporation's Adjusted Basis = Adjusted Basis of the Shareholder + Boot. The shareholder's basis = Adjusted basis of asset – liabilities assumed by the corporation. The shareholder will be taxed on boot received.
Partnership basis is calculated much in the same way as C Corp basis, except you must remember that the partner will still be responsible for part of the liabilities the partnership assumes from himself and the other partners.
The biggest difference in partnership and corporation basis is distributions and liquidation.
For distributions, the partners will not be taxed on distributions received from the partnership, but shareholder will get taxed on the distributions (dividends) they receive if the have basis and the company has E&P. If the corporation has no E&P and the shareholder has basis the distributions are not taxed. If the corporation has no E&P and the shareholder has no basis the distribution is taxed as a capital gain distribution
For liquidations the partner will only be taxed on cash received in excess of his basis. While a shareholder will be taxed on the FMV of the assets received in excess of his basis.
I know that this is really simplified, but it will help to solve most of the basis questions.
FAR - 93 - 7/1/14
AUD - 94 - 7/25/14
REG - 92 - 8/30/14
BEC - 89 - 10/6/14