David Hasen (Florida), Three Cheers for Proposed Changes to Partnership Debt Basis Allocation Rules, 173 Tax Notes Fed. 489 (Oct. 25, 2021):

In this article, Hasen explains problems with the rules regarding the allocation of basis credit among partners for the partnership’s third-party debt, and why the proposed change from Senate Finance Committee Chair Ron Wyden, D-Ore., would go a long way toward solving them.

Conclusion
Enactment of proposed section 752(e)(1) would represent a substantial improvement over existing law. The PPR aligns basis credit with economic reality; it eliminates tax-motivated manipulations of essentially meaningless risk-of-catastrophic loss allocations; and it eliminates the tax disparity between economically similar recourse and nonrecourse debt arrangements. These reasons alone would suffice to recommend the provision.

Beyond them, the PPR follows a principle that the tax law should have embraced a long time ago, which is that debt is closely similar to a rental arrangement. Viewing debt in this way provides benefits beyond improving the tax rules for partnership borrowing, something that I also argued in the article mentioned above. A considered review of debt so understood could go some way to addressing other problems in the debt area, including the proper treatment of debt cancellation and other matters.