A. Regarding a partner's basis in the partnership interest, classify each of the following as either an item that "Increases basis" or one that "Decreases basis".

1.Distribution from the partnership (Decrease basis/Increase basis)

2.Gain recognized under 721(b) (Decrease basis/Increase basis)

3.Partner's liability assumed by the partnership (Decrease basis/Increase basis)

4.The partner's share of taxable income (Decrease basis/Increase basis)

5.Additional contribution to the partnership (Decrease basis/Increase basis)

6.The partner's share of separately stated deductions, foreign taxes, losses, and nondeductible/noncapitalized expense (Decrease basis/Increase basis)

7.The partner's share of any partnership liability (Decrease basis/Increase basis)

B. Complete the following sentences regarding a partner's basis.

1.A partner's basis is (adjusted when necessary/never adjusted) to determine the basis for the partnership interest.

2.A partner's basis may never be reduced below zero (i.e., no negative basis is allowed). (True/False)

3.Basis adjustments preserve the partnership's (single-level/dual-level) of taxation. If basis is (decreased/increased) by partnership income, that income (would/would not) be taxed again when the partner sells the partnership interest at its fair market value.