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TIMING OF CHARITABLE DEDUCTIONSas well as by the sum of the partner’s distributive share for the tax year and priortax years of the losses of the partnership and expenditures of the partnership thatare not deductible in computing taxable income and not properly chargeable to acapital account. 73The adjustments to the basis of a partner’s interest in a partnership are necessaryto prevent inappropriate or unintended benefits or detriments to the partners.Generally, the basis of a partner’s interest in a partnership is adjusted toreflect the tax allocations of the partnership to that partner. This adjustmentensures that the income and loss of the partnership are taken into account by itspartners only once. Also, adjustments must be made to reflect certain nontaxableevents in the partnership. 74 For example, a partner’s share of nontaxable income(such as exempt income) is added to the basis of the partner’s interest because,absent a basis adjustment, the partner could recognize gain with respect to thetax-exempt income (such as on a sale or redemption of the partner’s interest)and the benefit of the tax-exempt income would be lost to the partner. Likewise,a partner’s share of nondeductible expenditures must be deducted from thepartner’s basis to prevent that amount from giving rise to a loss to the partner ona sale or redemption of the partner’s interest in the partnership.In determining whether a transaction results in exempt income 75 or a nondeductiblenoncapital expenditure, 76 the inquiry must be whether the transactionhas a permanent effect on the partnership’s basis in its assets, without a correspondingcurrent or future effect on its taxable income.An example may clarify these points. A and B each contribute an equalamount of money to form a general partnership. Under the partnership agreement,each item of income, gain, loss, and deduction of the partnership is allocated50 percent to A and 50 percent to B. This partnership has unencumberedproperty, having a basis of $60,000 and a fair market value of $100,000. The partnershipcontributes the property to a charitable organization. (This property isnot of the type that requires reduction of the charitable deduction by elements ofordinary income or capital gain.) 77As discussed, the contribution of this property by this partnership is nottaken into account in computing the partnership’s taxable income. Consequently,the contribution results in a permanent decrease in the aggregate basisof the assets of the partnership that is not taken into account by the partnershipin determining its taxable income and is not taken into account for federalincome tax purposes in any other manner. Therefore, the contribution of theproperty, and the resulting permanent decrease in partnership basis, is an expenditureof the partnership that is not deductible in computing its taxable incomeand is not properly chargeable to a capital account.Reducing the partners’ bases in their partnership interests by their respectiveshares of the permanent decrease in the partnership’s basis in its assets preservesthe intended benefit of providing a deduction for the fair market value of73 IRC § 705(a)(2).74 IRC § 705(a)(1)(B), (a)(2)(B).75 IRC § 705(a)(1)(B).76 IRC § 705(a)(2)(B).77 See §§ 4.5, 4.6. 184