A general partnership is formed. Partner A contributes cash of ,000 for a 50% interest. The partnership borrows ,000 from a bank (Recourse debt). What is Partner A's initial outside basis?

Answer options:

,000

How to approach this question

Partnership Basis = Cash + Adjusted Basis of Property + Share of Liabilities. Recourse debt -> General Partners share. Nonrecourse debt -> Profit ratio share.

Full Answer

B.,000✓ Correct

,000

A partner's basis includes their contribution plus their share of partnership liabilities. ,000 cash + (50% * ,000 debt) = ,000.

Common mistakes

Forgetting to add the share of liabilities to basis.

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