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

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: https://www.youtube.com/@Open-exam-prep