An assessment increases or decreases a limited partner's basis?

A limited partner's basis in a partnership is affected by various factors, including assessments made by the partnership. When an assessment occurs, it typically requires the limited partner to contribute additional funds or allows them to absorb a loss, which directly impacts their investment in the partnership.

When an assessment increases a limited partner's financial commitment, it raises their basis because the basis is reflective of the partner's total investment in the partnership. Contributions, whether as part of an assessment or other capital calls, enhance the partner's equity stake and are thus included in their basis calculation.

Understanding that the basis can increase or decrease based on partnership activities is crucial for determining tax implications, including gain or loss recognition upon disposition of the partnership interest or when distributions occur. However, in this case, since an assessment specifically results in additional contributions or obligations, it leads to an increase in the limited partner's basis.