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 effect do the debts have on Ray's basis?
A)Increase of $22,500
B)Increase of $25,000
C)Increase of $45,000
D)Increase of $67,500

Question

Quizplus · Accepted Answer

Ray's basis increases by his share of the nonrecourse debt, which is 45% of $50,000, equaling $22,500. Recourse debt does not affect a limited partner's basis.

Ray, Ronnie and Joe Are Partners in a Limited Partnership