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 During the period, L\'s share of the partnership income is $120,000 and L has withdrawn $75,000.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? A) $60,000, B) $89,000, C) $105,000, D) $121,000.

Solution

Solution:

The partnership has recourse liabilities of $48,000. As L has not obligation to contribute additional funds, therfore there is no economic risk of loss in recourse liability and his share in recourse liability will not be added to compute his basis in partnership.

L\'s basis in partnership = Contribution + Share of profit - Withdrawl

=$60,000 + $120,000 - $75,000 = $105,000.