Final answer:
The general partner's outside basis includes their share of partnership liabilities in addition to their tax-basis capital account.
Step-by-step explanation:
The correct answer is option - their share of partnership liabilities. A general partner's outside basis in a partnership is generally equal to their tax-basis capital account plus their share of partnership liabilities. This outside basis essentially represents the partner's economic interest in the partnership. While the fair market value of property they contributed, their share of partnership assets, and the total guaranteed payments they received can affect the capital account, it is the share of partnership liabilities that directly influences the outside basis.
It reflects the partner's economic interest in the partnership and is impacted by personal liability for debts, unlike in a limited liability partnership.
General partners face the disadvantage of personal liability, which can potentially put their personal assets at risk in the event of bankruptcy or lawsuit. This contrasts with a limited liability partnership where a partner's liability is limited to their investment in the company, safeguarding personal assets like a home, car, or personal bank accounts from business failures.