A, B, and C each contribute $20,000 to form the ABC general partnership. The partnership agreement satisfies the primary test for economic effect under 704(b). Partnership profits and losses a.re allocated 40% to A, 40% to Band 20% to C. The partne1ship uses its $60,000 cash and borrows an additional $40,000 on a recomse basis and purchases land for $100,000. 

(a) How will the $40,000 liability be allocated, and what will be each partner's outside basis?

(b) What result in (a), above, if A, B, and C had contributed $10,000, $20,000, and $30,000, respectively, to the ABC partnership?

(c) What results in (a), above, if A and B are limited partners who are not obligated to restore a capital account deficit, but the partnership agreement includes a qualified income offset?

(d) What result in (c), above, if A contributes $15,000 of stock to the partnership as security for the liability and all income, gain, or loss on the stock is allocated to A? What result if A contributes his $15,000 note as security for the liability?

(e) What result in (c), above, if A personally guarantees the $40,000 liability?

Answer rating: 100% (QA)

a In a general partnership liabilities are typically allocated based on the partnership agreement In ... View the full answer