REG- Outside/Inside Partnership Basis

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  • #1440572
    nk522
    Participant

    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???

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Viewing 7 replies - 1 through 7 (of 7 total)
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  • #1440575
    Wannafree
    Participant

    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 ).

    WannaB
    #1440585
    Wannafree
    Participant

    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).

    WannaB
    #1440588
    nk522
    Participant

    @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

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    #1440597
    Wannafree
    Participant

    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).

    WannaB
    #1440603
    nk522
    Participant

    @Nath- Thank you!!

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    #1440609
    Wannafree
    Participant

    You are welcome.

    WannaB
    #1441236
    Skynet
    Participant

    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.

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