A partnership has one general partner, Allen, who materially participates in the business. Allen had a $30,000 distributive share of ordinary losses for this year and the partnership had no separately stated gains or losses. There are no changes in liabilities during this year and there are no additional contributions or distributions. At the beginning of this year, the Sec. 705 basis was $40,000 and the at- risk basis was $15,000. The basis on December 31 of this year based on the above information is

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The basis at the beginning of the year was $40,000, and the partnership had a $30,000 loss, bringing the basis down to $10,000. However, since the partnership had no separately stated gains or losses, the at-risk basis remains the same at $15,000. Therefore, the basis on December 31 of this year is $10,000, which is less than the at-risk basis of $15,000.

A Partnership Has One General Partner, Allen, Who Materially Participates