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Basis is a huge deal on the Enrolled Agent Exam.  This is mostly true when we consider Part 2, which is statistically the hardest part to pass.

Partnerships create endless fascination for us tax nerds.  One issue that is always considered is the difference between inside basis and outside basis.

Inside basis is the basis that the PARTNERSHIP has in the assets owned by the partnership.

Outside basis is the basis the the PARTNER has in their own partnership interest.  Think of partnership interest somewhat like a coporate shareholder would consider their investment in the stock they own.