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Basis

The value of an asset for tax purposes, used to determine gain or loss when the asset is sold or distributed. It typically includes the original cost plus any improvements.

Partnership

A business structure where two or more individuals or entities share ownership, profits, and losses. For tax purposes, partnerships generally 'pass through' their income and losses to the partners, who report them on their individual tax returns.

Distribution

When a partnership gives money or property to one or more of its partners.

Related Parties

Individuals or entities that have a close relationship, such as family members, or businesses under common control. Tax rules often treat transactions between related parties differently to prevent tax avoidance.

Adjusted Basis

The original cost or value of an asset, adjusted for factors like improvements, depreciation, or prior distributions. It is used to calculate taxable gain or loss.

Gain Recognition

The act of reporting a profit or increase in value for tax purposes. When gain is 'recognized,' it means it becomes taxable income.

Tax Shelter