Partner's Basis

[Taxman]

I have a client that is a partnership and owns a residential rental property (basis of property is $120,000 including closing costs). There is also a mortgage on the property for $110,000 in the name of each partner. To calculate the basis for each partner (2) would in be the $120,000 or do I need to reduce it by the amount of the mortgage giving each partner a basisi in the partnership of $5,000? My thought is each partner's basis is $60,000.

[Bill Tubbs]

include the loan in basis

I have a client that is a partnership and owns a residential rental property (basis of property is $120,000 including closing costs). There is also a mortgage on the property for $110,000 in the name of each partner. To calculate the basis for each partner (2) would in be the $120,000 or do I need to reduce it by the amount of the mortgage giving each partner a basisi in the partnership of $5,000? My thought is each partner's basis is $60,000.

Sounds like the 2 partners ponied up $10,000 ($120,000 cost minus $110,000 mortgage) -- was this $5,000 a piece, or did one partner pony up more than the other? Any how, take the amount each one paid into the partnership, plus (if both names are on the mortgage) half of the principal balance is added to each partner's basis. But note that as the mortgage goes down, so does each partner's basis.

Bill