# 26 U.S.C. § 705: Determination of basis of partner’s interest

Source: OLRC release point 119-134 <https://uscode.house.gov/us/usc/119-134/t26/s705>. Cite pinpoints as 26 U.S.C. § 705(a)(1).

## § 705(a) General rule

The adjusted basis of a partner’s interest in a partnership shall, except as provided in subsection (b), be the basis of such interest determined under section 722 (relating to contributions to a partnership) or section 742 (relating to transfers of partnership interests)—

**§ 705(a)(1)** increased by the sum of his distributive share for the taxable year and prior taxable years of—

**§ 705(a)(1)(A)** taxable income of the partnership as determined under section 703(a),

**§ 705(a)(1)(B)** income of the partnership exempt from tax under this title, and

**§ 705(a)(1)(C)** the excess of the deductions for depletion over the basis of the property subject to depletion;

**§ 705(a)(2)** decreased (but not below zero) by distributions by the partnership as provided in section 733 and by the sum of his distributive share for the taxable year and prior taxable years of—

**§ 705(a)(2)(A)** losses of the partnership, and

**§ 705(a)(2)(B)** expenditures of the partnership not deductible in computing its taxable income and not properly chargeable to capital account; and

**§ 705(a)(3)** decreased (but not below zero) by the amount of the partner’s deduction for depletion for any partnership oil and gas property to the extent such deduction does not exceed the proportionate share of the adjusted basis of such property allocated to such partner under section 613A(c)(7)(D).

## § 705(b) Alternative rule

The Secretary shall prescribe by regulations the circumstances under which the adjusted basis of a partner’s interest in a partnership may be determined by reference to his proportionate share of the adjusted basis of partnership property upon a termination of the partnership.

## Regulations

- [Treas. Reg. § 1.705-1](/26/reg/1.705-1.md): Determination of basis of partner's interest. (interprets § 705)
- [Treas. Reg. § 1.705-2](/26/reg/1.705-2.md): Basis adjustments coordinating sections 705 and 1032. (interprets § 705)

## Final rules

- [81 FR 17066](https://www.federalregister.gov/documents/2016/03/28/2016-06227/limitations-on-the-importation-of-net-built-in-losses) (2016): Limitations on the Importation of Net Built-In Losses
- [78 FR 54156](https://www.federalregister.gov/documents/2013/09/03/2013-21330/limitations-on-duplication-of-net-built-in-losses) (2013): Limitations on Duplication of Net Built-in Losses
- [70 FR 30334](https://www.federalregister.gov/documents/2005/05/26/05-10266/assumption-of-partner-liabilities) (2005): Assumption of Partner Liabilities
- [68 FR 12815](https://www.federalregister.gov/documents/2003/03/18/03-6345/amendments-to-rules-for-determination-of-basis-of-partners-interest-special-rules) (2003): Amendments to Rules for Determination of Basis of Partner's Interest; Special Rules
- [67 FR 15112](https://www.federalregister.gov/documents/2002/03/29/02-7649/determination-of-basis-of-partners-interest-special-rules) (2002): Determination of Basis of Partner's Interest; Special Rules

## Leading cases

- [Babin v. Commissioner, 23 F.3d 1032 (6th Cir. 1994)](https://www.courtlistener.com/opinion/669703/stephen-babin-betty-boehm-babin-v-commissioner-of-internal-revenue/)
- [Casey v. Commissioner, 38 T.C. 357 (1962)](https://www.courtlistener.com/opinion/4701115/casey-v-commissioner/)
- [Gershkowitz v. Commissioner, 88 T.C. 984 (1987)](https://www.courtlistener.com/opinion/4706456/gershkowitz-v-commissioner/)

## Connections

Cites: § 613A Limitations on percentage depletion in case of oil and gas wells; § 703 Partnership computations; § 722 Basis of contributing partner’s interest; § 733 Basis of distributee partner’s interest; § 742 Basis of transferee partner’s interest

Cited by: none

## Amendments

- 1954-08-16: [Act Aug. 16, 1954, ch. 736](/26/act/1954-ch736.md), 68A Stat. 242
- 1976-10-04: [Pub. L. 94-455](/26/act/94-455.md), 90 Stat. 1834
- 1984-07-18: [Pub. L. 98-369](/26/act/98-369.md), 98 Stat. 974