26 U.S.C. § 705 - Determination of basis of partners interest

26 USC 705 - Determination of basis of partners interest

(a) General rule 
The adjusted basis of a partners interest in a partnership shall, except as provided in subsection (b), be the basis of such interest determined under section 722 (relating to contributions to a partnership) or section 742 (relating to transfers of partnership interests)
(1) increased by the sum of his distributive share for the taxable year and prior taxable years of
(A) taxable income of the partnership as determined under section 703 (a),
(B) income of the partnership exempt from tax under this title, and
(C) the excess of the deductions for depletion over the basis of the property subject to depletion;
(2) decreased (but not below zero) by distributions by the partnership as provided in section 733 and by the sum of his distributive share for the taxable year and prior taxable years of
(A) losses of the partnership, and
(B) expenditures of the partnership not deductible in computing its taxable income and not properly chargeable to capital account; and
(3) decreased (but not below zero) by the amount of the partners deduction for depletion for any partnership oil and gas property to the extent such deduction does not exceed the proportionate share of the adjusted basis of such property allocated to such partner under section 613A (c)(7)(D).
(b) Alternative rule 
The Secretary shall prescribe by regulations the circumstances under which the adjusted basis of a partners interest in a partnership may be determined by reference to his proportionate share of the adjusted basis of partnership property upon a termination of the partnership.