Basis Shifting is a Rip-off Act

This bill targets tax avoidance tactics known as "basis shifting" in partnerships involving related parties. It requires partners to recognize gain when receiving property distributions from partnerships where related parties are involved, preventing them from artificially increasing the tax basis of partnership assets to reduce future taxable gains. The law defines "applicable partnerships" broadly (including any with related-party transactions) but excludes qualifying small businesses meeting gross receipts tests. Key provisions mandate that basis adjustments for distributed property must align with recognized gain, and increase penalties for understatements related to these transactions. It directly affects partnerships engaging in related-party distributions that previously allowed basis-shifting to defer or avoid taxes.