Treasury Regulations · 26 CFR
§ 1.722-1. Basis of contributing partner's interest.
Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).
Regulation under 26 U.S.C. § 722
Cite as 26 CFR § 1.722-1
At a glance
Read from the text and its source citation. Not part of the regulation.
- Status
- In the current eCFR
- Issued
- November 26, 1960 by T.D. 6500
- Last amended
- July 16, 2004 by T.D. 9137
- Issued under
- 26 U.S.C. § 722
- Length
- 457 words · about 2 min to read
- Cross-references
- cites 3 Code sections and 3 regulations; cited by 0
The basis to a partner of a partnership interest acquired by a contribution of property, including money, to the partnership shall be the amount of money contributed plus the adjusted basis at the time of contribution of any property contributed. If the acquisition of an interest in partnership capital results in taxable income to a partner, such income shall constitute an addition to the basis of the partner's interest. See paragraph (b) of § 1.721-1. If the contributed property is subject to indebtedness or if liabilities of the partner are assumed by the partnership, the basis of the contributing partner's interest shall be reduced by the portion of the indebtedness assumed by the other partners, since the partnership's assumption of his indebtedness is treated as a distribution of money to the partner. Conversely, the assumption by the other partners of a portion of the contributor's indebtedness is treated as a contribution of money by them. See section 752 and § 1.752-1. See § 1.460-4(k)(3)(iv)(A) for rules relating to basis adjustments required where a contract accounted for under a long-term contract method of accounting is transferred in a contribution to which section 721(a) applies. The provisions of this section may be illustrated by the following examples:
A acquired a 20-percent interest in a partnership by contributing property. At the time of A's contribution, the property had a fair market value of $10,000, an adjusted basis to A of $4,000, and was subject to a mortgage of $2,000. Payment of the mortgage was assumed by the partnership. The basis of A's interest in the partnership is $2,400, computed as follows:
| Adjusted basis to A of property contributed | $4,000 |
| Less portion of mortgage assumed by other partners which must be treated as a distribution (80 percent of $2,000) | 1,600 |
| Basis of A's interest | 2,400 |
If, in example 1 of this section, the property contributed by A was subject to a mortgage of $6,000, the basis of A's interest would be zero, computed as follows:
| Adjusted basis to A of property contributed | $4,000 |
| Less portion of mortgage assumed by other partners which must be treated as a distribution (80 percent of $6,000) | 4,800 |
| (800) |
Since A's basis cannot be less than zero, the $800 in excess of basis, which is considered as a distribution of money under section 752(b), is treated as capital gain from the sale or exchange or a partnership interest. See section 731(a).
[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 9137, 69 FR 42558, July 16, 2004]
Cross-references
Computed from the citations in the text of 26 CFR.
Code sections it cites
- § 752 Treatment of certain liabilities
- § 721 Nonrecognition of gain or loss on contribution
- § 731 Extent of recognition of gain or loss on distribution
Regulations it cites
Amendment history
From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.
- Amended by T.D. 9137 (69 FR 42558)
- Amended (25 FR 14021)
- Issued by T.D. 6500 (25 FR 11814)
Where it sits in 26 CFR
- Subchapter A Income tax
- Part 1 Income taxes
- Contributions to a partnership