Ray, Ronnie and Joe are partners in a limited partnership.Ray and Ronnie, the limited partners, each own 45 percent of the partnership and Joe, the general partner, owns the other 10 percent.The partnership incurs $50,000 of nonrecourse debt and $100,000 of recourse debt.What is the effect on Joe's basis for these debts?
A)Increases by $155,000
B)Increases by $105,000
C)Increases by $100,000
D)Increases by $15,000

Question

Quizplus · Accepted Answer

Joe's basis increases by his share of the partnership's liabilities. As the general partner, Joe is responsible for the recourse debt, which is $100,000. Additionally, he shares in the nonrecourse debt based on his ownership percentage, which is 10% of $50,000, equaling $5,000. Therefore, Joe's basis increases by $100,000 + $5,000 = $105,000.

Ray, Ronnie and Joe Are Partners in a Limited Partnership