Document Type


Publication Date

Winter 1980

Publication Title

New Mexico Law Review

Publication Title (Abbreviation)

N.M. L. Rev.





First Page


Last Page



In 1954, Congress enacted the first comprehensive statutory treatment of partners and partnerships in an attempt to clarify and simplify an area of the law it considered strikingly confused. A quarter of a century later, much confusion and complexity continues and must be dealt with by practitioners who do not have the luxury of specializing in tax, much less in partnership tax. The rules on optional adjustments to basis are particularly perplexing to many attorneys because they involve the accounting function, often foreign to the lawyer's training and talents, and often performed with heavy reliance on another profession. The two most common occasions for adjusting the basis of partnership properties are the sale or exchange of a partnership interest and the transfer of an interest on the death of a partner. These two events are treated alike and are the subject of this article. A third occasion for adjusting bases in partnership properties is the distribution of property to a partner. In many situations, a new partner who does not receive an optional adjustment is required to recognize gain when, in economic reality, he or she has no gain at all. Similarly, optional adjustments often permit new partners to claim much greater depreciation deductions than they otherwise could. The purpose of this paper is to explain clearly the operation and deficiencies of the rules that govern the optional adjustments that can be made to the basis of partnership property when a partnership interest is transferred by sale or exchange or on death. It begins with a section to provide perspective for the reader who is a newcomer to the world of partnership taxation.


© 1980 Donald J. Weidner


First published in New Mexico Law Review.

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