On January 1, 2020, Barry Score acquires a 25 percent interest in a limited partnership for $200,000. Barry pays an immediate deposit of $50,000 with the balance due in 2022. For the year ending December 31, 2020, the partnership determines that it has a $40,000 capital gain and a $100,000 business loss. What is Barry's at-risk amount?

Question

Quizplus · Accepted Answer

Barry's at-risk amount is the amount of money that he could lose if the partnership investment goes wrong. In this case, Barry has only paid a deposit of $50,000, so that is the only amount that counts towards his at-risk amount for 2020.

The partnership's capital gain of $40,000 does not affect Barry's at-risk amount, but the business loss of $100,000 does. Since Barry owns 25 percent of the partnership, his share of the loss is $25,000.

Therefore, Barry's at-risk amount for 2020 is $50,000 - $25,000 = $25,000. However, the question asks for Barry's at-risk amount, not just for 2020. It is important to note that the remaining $150,000 that Barry still owes for his partnership interest will count towards his at-risk amount in future years, assuming he pays it.

Therefore, the correct answer is C) $60,000, which includes the $25,000 from 2020 plus the $35,000 ($150,000 x 0.25) from the remaining investment that will count towards Barry's at-risk amount in future years.

On January 1, 2020, Barry Score Acquires a 25 Percent