Stan owns a 20% interest in a partnership (not real estate)in which his at-risk amount was $38,000 at the beginning of the year.During the year,the partnership borrows $80,000 on a nonrecourse note and incurs a loss of $50,000 from operations.Stan's at-risk amount at the end of the year is $44,000.

Question

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The fact that the partnership borrowed $80,000 on a nonrecourse note indicates that Stan's at-risk amount should be decreased by his share of the loan. Therefore, his at-risk amount at the end of the year should be $38,000 - $16,000 (20% of $80,000) - $50,000 = -$28,000, which is a negative amount and not possible according to tax rules.

Stan Owns a 20% Interest in a Partnership (Not Real