i was confident until Becker Ch 4. partnership.

For gift, donor's basis is used with some exceptions.

Most cases, FMV was used for calculations in corp distribution.

now came to partnership...NBV is used for partnership distribution...

confusing.. my brain is mixed up... need help to clear up my memory... anyone has special strategy to memorize all the rules?

Think of the pass key. If something is taxable, then you generally would use FMV. IF it is nontaxable then use NBV.

Forming a corporation (if it meets the rules) are generally tax free, so you would use the NBV of the assets in contributions. However, distributions by the Corp. are usually taxed, so you would use the FMV of property. Dividends are taxed as dividend income to the extent of E&P, then a return of capitial (reduction of basis), then capital gain if beyond basis. Remember, distribution of property by the corp. you use FMV as well. Corporation first treats this as a sale of the property (FMV-Adj Basis) which increases their current E&P.

Partnership distributions are usually tax-free unless money received exceeds basis. You use the money received or adjusted basis (because it is tax free) to reduce basis in the partnership...but not below 0. In a complete liquidation, must 0 out to get out. A loss is also limited to the capital account plus "at risk" amount, or partner's share of liabilities.

Gift basis and related party are unique, but are generally the same. Generally you use the carryover basis, if the FMV is greater than the Adj Basis on the day of the gift. The exception to this is when the Adjusted Basis is greater than the FMV on the date of the gift. Then you need to determine it based on the recipient's subsequent selling price. In this case it can either be the lower FMV amount, the higher Adjusted basis amount, or the middle basis (if sold in the middle).

I think the best thing to do is just practice it.