Enrolled Agent Exam [Part 2] 06, Inside Basis vs Outside Basis

About this episode

This episode discusses the differences between inside and outside basis in partnerships and their implications for taxation.

This podcast is made by Ran Chen, who holds an EA license, Insurance and Securities licenses (Series 6, 63, 65), and the CFP® designation. He is passionate about opening access to high-quality exam preparation resources and helping learners prepare more effectively for professional certification exams. In this episode you will learn: - The core difference between outside basis (the partner's basis in their interest) and inside basis (the partnership's basis in its assets). - Why inside and outside basis start out equal at a partnership's formation but diverge due to events like the sale of a partnership interest. - How a new partner can have a different outside basis (their cost) than their share of the partnership's inside basis, leading to potential double taxation. - The function of a §754 election, which allows a §743(b) adjustment to align the new partner's inside basis share with their outside basis. - Common exam traps that test the tax consequences for a new partner both with and without a §754 election in effect. For more free exam prep tools, practice questions, and AI-powered explanations, visit https://open-exam-prep.com/ or YouTube Channel…

People in this episode

Host: Ran Chen

Topics covered

• Enrolled Agent Exam
• inside basis
• outside basis
• partnership taxation
• §754 election
• exam preparation

Keywords

• Enrolled Agent Exam
• inside basis
• outside basis
• partnership interest
• double taxation
• §754 election
• exam traps

Mentioned in this episode

Organizations: Open Exam Prep, YouTube Channel

Products: §754 election, §743(b) adjustment

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