Partnership Inside Basis Adjustments and Remedial Allocations

8 Pages Posted: 14 Mar 2001 Last revised: 12 Sep 2015

See all articles by Karen C. Burke

Karen C. Burke

University of Florida Levin College of Law


This article addresses the interaction between sections 197, 704(c), and 734(b) when an intangible is contributed to a partnership and a portion of the contributing partner's interest is subsequently redeemed for cash. Although the final regulations under section 197 provide guidance concerning the treatment of intangibles contributed to a partnership, they do not address the relationship between the section 704(c) remedial allocation method and section 734(b) adjustments. This article argues that a partial-liquidation approach would eliminate the apparent confusion concerning partnership inside basis adjustments and remedial allocations when the contributing partner receives a disproportionate distribution in exchange for a portion of her partnership interest. A partial-liquidation approach, Burke says, would trigger a proportionate reduction in future remedial allocations, while preserving the intended function of section 734(b) as a common basis adjustment. In implementing its authority to modify the remedial allocation method to reflect more clearly the partners' income, she concludes, the Treasury should give careful consideration to a partial-liquidation approach.

Keywords: partnership, basis adjustments, 704(c), intangibles, remedial

JEL Classification: K34

Suggested Citation

Burke, Karen C., Partnership Inside Basis Adjustments and Remedial Allocations. Tax Notes, Vol. 90, No. 12, March 19, 2001, Available at SSRN:

Karen C. Burke (Contact Author)

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

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