Better Twice Measured: Partner Basis from Partnership Debt

Abstract

Johnson argues that the current regulations under section 752 allow free trade in the purchase and sale of naked deductions, which should be ended. Johnson argues that proposed new regulations should not allow any nonrecourse partnership liability to be allocated to a partner who has a zero or negative capital account and no claim on equity, because Crane requires an equity interest for the debt to be considered a burden under economic substance. Johnson concludes that Treasury should fix the current regulations without involving Congress.