The XYZ Partnership has the following assets and liabilities

The XYZ Partnership has the following assets and liabilities before any reduction for year-end principal payments on the liabilities. Assume the book basis and tax basis are the same amount: They have assets with $300,000 basis and FMV of $400,000. Nonrecourse debt of $500,000 basis and FMV of $500,000. If the partners have a deficit in their capital accounts of ($22,000), what is the amount of minimum gain chargeback if partnership taxable income for the year is $32,000 and the liabilities are reduced by $150,000 to $350,000? A. $20,000 B$22,000 C. $32,000 or D. $50,000

Solution

Solution: $22,000

Working:

Liabilities

350,000

Taxable income

32,000

Capital deficit

22,000

minimum gain chargeback = 22,000