George pays $10,000 for a 20% interest in a general partnership, which has recourse liabilities of $20,000. The partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. George's basis in his partnership interest is
A)$10,000.
B)$12,000.
C)$14,000.
D)$30,000.

Question

Quizplus · Accepted Answer

George's basis in the partnership interest includes his initial investment of $10,000 plus his share of the partnership's recourse liabilities. Since he has a 20% interest, he is responsible for 20% of the $20,000 recourse liabilities, which is $4,000. Therefore, his total basis is $10,000 + $4,000 = $14,000.

George Pays $10,000 for a 20% Interest in a General