Final answer:
In the context of a partnership, a partner's outside basis is increased by their share of the partnership's ordinary income. Distributions and losses decrease the basis, whereas income increases it. Thus, the correct answer is option D the partner's distributive share of partnership ordinary income.
Step-by-step explanation:
A partnership in the context of business and taxation is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests. The financial dealings of a partnership are important for tax purposes, particularly the concept of a partner's outside basis. In a partnership, a partner's outside basis is essentially his or her investment in the partnership, which is subject to adjustment upward or downward for various transactional activities over the lifetime of the partnership.
Among the options provided, one that increases a partner's outside basis in a partnership is the partner's distributive share of partnership ordinary income. The outside basis is increased by any income allocated to the partner which includes their share of ordinary business income, as well as any separately stated income items. Therefore, when a partner is allocated a share of the partnership's income, it increases the partner's outside basis because it represents an addition to the partner's investment in the partnership.
On the other hand, charitable contributions do not directly affect a partner's outside basis, and distributions can actually decrease the outside basis, not increase it. Similarly, the partner's distributive share of partnership losses will decrease, rather than increase, the outside basis.
The correct option that increases a partner's outside basis in a partnership is D. the partner's distributive share of partnership ordinary income.