Bart contributes $100,000 to the Fish Partnership for a 40% interest. During the first year of operations, Fish has a profit of $20,000. At the end of the first year, Fish has outstanding loans from the following banks.
First Bank (recourse)
$10,000
Second Bank (nonrecourse)
30,000
What is Bart's at-risk basis in Fish at the end of the first year?
A) $100,000
B) $108,000
C) $112,000
D) $124,000
E) None of the above

Question

Quizplus · Accepted Answer

Bart's at-risk basis is his original contribution of $100,000, plus his share of the partnership's recourse debt, which is $10,000 x 40% = $4,000. Therefore, Bart's at-risk basis is $100,000 + $4,000 = $112,000.

Bart Contributes $100,000 to the Fish Partnership for a 40