What Is the Difference Between a Partner's Basis in the Partnership

question 36

Essay

What is the difference between a partner's basis in the partnership interest and a partner's § 704(b) book capital account? What are the purposes of these two amounts? Why are these amounts typically different?

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Definitions:

Nonlabor Income

Earnings derived from sources other than direct employment, including investments, interest, and property income.

Wage Rate

The fixed amount of compensation or payment made to an employee by an employer in return for work performed, typically expressed on an hourly, daily, or piecework basis.

Labor

The exertion of human energy, both bodily and cognitive, employed in generating goods and services.

Leisure

Free time when one is not working or occupied, which can be used for rest, entertainment, or activities one enjoys.