L invests 60000 for onethird interest in the LMN partnership

L invests $60,000 for one-third interest in the LMN partnership as a limited partner. During the period, L\'s share of the partnership income is $120,000 and L has withdrawn $75,000. The partnership has recourse liabilities of $48,000. What is L\'s basis in the partnership assuming that L has NO obligation to contribute additional funds? (Why?)

Solution

Partnership debt under recourse basis :

1. Debt of the partnership that at least one partner is personally liable for.

- The personal liability can exist through operation of state law or through personal guarantees made to the creditor.

- Personal liability of a party related to a partner is treated as personal liability of the partner.

In the given case, the partnership has recourse liabilities of $48,000, which shall be shared as per the sharing ratio of the remaining partners ie., 2/3 partners.

L\'s share of recourse liabilities is $0 ie., only the remaining partners bear the risk of loss of recourse.