7762 / What is the basis of the donee of a limited partnership interest?

The donee’s unadjusted basis for determining gain is the greater of the amount of the donee partner’s share of liabilities (see Q 7738) or the transferor’s adjusted basis (see Q 7737) at the time of the transfer. If the fair market value of the interest is greater than the donor’s adjusted basis, the donee’s unadjusted basis is increased by the amount of the gift tax paid that is attributable to the appreciation in value, but not increased in excess of the fair market value of the gift. The donee’s unadjusted basis for determining loss is the lesser of the unadjusted basis as used in determining gain or the fair market value of the interest at the time of the transfer.¹ Thereafter, the donee’s basis is adjusted in the same manner as any other partner. See Q 7737.²