Rule: The partner's original basis is increased by the portion of the liabilities assumed by the partner, and this amount is equal to the partner's percentage ownership in the partnership.

Choice "d" is correct. A $100,000 increase in partnership liabilities generally increases each partner's basis in proportion to their ownership percentage. [Thus, a 25% partner will generally have a basis increase of $25,000 for an increase in partnership debt of $100,000.]

Choice "c" is incorrect. This incorrectly says that each partner will have a basis increase of $100,000 for a total partnership debt increase of $100,000. A partner is only responsible for debt in the proportion of his/her ownership interest.

Choice "b" is incorrect. Partnership basis will increase in proportion to the partner's economic loss percentage (risk) if the debt is recourse. Partnership basis may increase if the debt in nonrecourse, but there are limitations (beyond the scope of the exam).

Choice "a" is incorrect. A $100,000 increase in partnership liabilities generally increases each partner's basis in proportion to their ownership percentage. Partnership basis will increase in proportion to the partner's economic loss percentage (risk) if the debt is recourse. Partnership basis may increase if the debt in nonrecourse, but there are limitations (beyond the scope of the exam).