Individual liabilities by reason of the assumption by

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individual liabilities by reason of the assumption by the partner of partnership liabilities is considered as a contribution of money by such partner to the partnership. (b) Decrease in Partner's Liabilities: Any decrease in a partner's share of the liabilities of a partnership or decrease ina partner's individual liabilities by reason of the assumption by the partnership shall be treated as a distribution of money to the partner by the partnership. Debt Allocation Reg. § 1.752-3(a): Nonrecourse liabilities generally are allocated according to the ratio in which the partners share profits. Recourse vs. Nonrecourse Reg. §1-752-1(a): o(1) Recourse Liability: Partnership liability is recourse to the extent that any partneror related person bears the economic risk of loss for that liability. Recourse and Limited Liability (Reg. § 1.752-2(a)): In the case that only some partners (general partners) are liable for the loan, they will be allocated the liability because they bear the economic risk of loss for this liability. o(2) Nonrecourse Liability: Partnership liability is a nonrecourse liability to the extent that no partneror related person bears the economic risk of loss for that liability. Nonrecourse and Limited Liability (Reg. § 1.752-3(a)): Even if only some partners (general partners) are liable for the loan itself, this is a nonrecourse loan, so the partners are equally allocated the liability. Partnership Distributes Money to PartnersNon-Taxable Event §731: Gain is not recognized to the partner unless the money exceeds their basis. Partner's Basis in Interest §733 and § 705(a)(2): When a partnership distributes money to a partner (other than in liquidation of the partner's interest), the basis in the interest is reduced by the amount of any money distributed and the amount of the basis to such partner of distributed propertyother than money (as determined under §732).Partnership Sells AssetGenerally §704(a): Look to the partnership agreement. The gain or loss is split between the partners in their distributive amounts. Any gain or loss increases or decreases the partners' capital accounts and outside bases. Contributed by Partner with Built-in Gain §704(c): When a partnership sells an asset contributed by a partner that had built in gain on it, the built in gain is taxed to the contributing partner for the amount of that built in gain. The remaining amount is split between the partners in their distributive amounts. oContributing Partner's Capital Account: The contributing partner's capital account doesn't go up from the 704(c) gain either because it was already accounted for in the contribution. It does, however, increase the contributing partner's outside basis by the 704(c) amount. Contributed Receivables §724(a): Any gain or loss shall be treated as ordinary income or ordinary loss. Contributed by Partner Which was Inventory In Hands of Partner § 724(b): any gain or loss recognized by the partnership during the 5 years period starting after contribution shall be treated as ordinary income or loss. (i.e. real

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