Which of the following is NOT an adjustment to a partner's basis in a partnership interest?

In a partnership, a partner's basis in their partnership interest can be adjusted based on various transactions and events that occur throughout their involvement with the partnership. It’s important to understand each type of adjustment to clarify why one of the options does not constitute a proper adjustment.

A partner’s basis is increased by contributions made to the partnership, which reflects the capital being committed to the business. Similarly, the basis is increased by the partner's share of tax-exempt income, as this income contributes to the economic benefits realized by the partner, thus increasing their investment in the partnership.

In terms of decreases, a partner's basis is affected by distributions and certain payments. For instance, guaranteed payments—payments made to a partner for services or capital—are treated as deductible expenses for the partnership, leading to a decrease in the partner's basis.

Focusing on the adjustment related to an increase in the partner’s share of liabilities, this is where the distinction lies. A partner’s basis includes their share of partnership liabilities, meaning that an increase in those liabilities typically would increase a partner's basis rather than decrease it. Rather than diminishing their investment, rising liabilities manifest an obligation that the partner is responsible for, thus enhancing the basis in their interest.

Therefore, the assertion