Mandatory Basis Step Down - Spidell

Mandatory Basis Step Down

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Message Board Mandatory Basis Step Down

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    • #305367
      Anonymous
      Participant

      A nonprofit foundation had an interest in a partnership.  All that the partnership owns is notes receivables for which they generate substantial interest income.

      The nonprofit foundation also had a note payable to someone for $250,000.  In full consideration for cancelling the note payable, the nonprofit foundation settled it for their 99% interest in the above partnership.  The inside basis of the note receivable was $1,000,000, so there is presumably a substantial basis reduction under Sec. 734(d) for the new partner.

      Questions:

      1. When is the negative basis adjustment put into income for the new partner?  Is it pro-rata as the partnership collects principal on the note receivable?  Or is it when the note is fully collected in full?  Or is it when the partner disposes of the partnership interest?

      Thanks so much.

    • #305767
      Anonymous

      Just circling back to see if anyone has comments.

      Thanks so much.

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