7812. Does depletion affect a limited partner’s tax basis in a partnership interest?Nuco Employeercline202014-07-15T14:53:00Z2014-07-15T14:53:00Z1166948Summit Business Media72111214Site Map/Investments/Oil and Gas/DepletionTaxFactsDefaultArticle122901260-00-tf2.xml1260.00;#1910;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 2Does depletion affect a limited partner’s tax basis in his partnership interest?36700.0000000000TaxFactsDefaultArticleSBMEDIA\moss-admin2010-01-14T22:50:26Z7812. Does depletion affect a limited partner’s tax basis in a partnership interest?Yes, in two ways. First, a limited partner’s tax basis in the partnership interest is increased by the excess of the deductions for depletion over the basis of the property subject to depletion. (This can occur only when percentage depletion is taken).IRC Sec. 705(a)(1)(C); Treas. Reg. §1.705-1(a)(2). However, Treasury Regulation Section 1.705-1(a)(2) provides that the previous rule does not apply in the case of oil and gas property the basis of which is allocated to and computed separately by the partners of the partnership owning such property under IRC Section 613A(c)(7)(D) (See Q 7801). Second, the limited partner’s tax basis in the partnership interest is reduced (but not below zero) by the amount of allowable depletion deductions for each tax year.IRC Sec. 705(a)(3); Treas. Reg. §1.613A-3(e)(6)(ii). The basis is not reduced due to depletion deductions calculated at the electing large partnership level (See Q 7701).IRC Sec. 776(a)(3).