The liability is therefore bifurcated into a nonrecourse portion and a recourse portion that increases the guaranteeing partner's outside basis.

Do liabilities increase tax basis?

An increase in partnership liabilities has no effect on basis, it only affects a partner's capital account. An increase in partnership liabilities reduces a partner's basis in the partnership interest. A decrease in partnership liabilities reduces a partner's basis in the partnership interest.

What liabilities increase partner's basis?

Increases. The partner's basis is increased by the following items: The partner's additional contributions to the partnership, including an increased share of, or assumption of, partnership liabilities. The partner's distributive share of taxable and nontaxable partnership income.