Which one of the following is a true statement regarding the allocation of partn

Question

Which one of the following is a true statement regarding the allocation of partnership debt among the partners for purposes of calculating basis?

a.Nonrecourse debt is not allocated to general partners unless they personally guarantee the debt.

b.In a limited liability partnership, debt is allocated among the managing partners, but not the partners with "limited liability".

c.No debt is allocated to LLC members because they are not liable for entity debts.

d.For basis purposes, partnership debt is allocated among the partners even if no partner is personally liable for the debt.

e.In a limited partnership, debt is only allocated to general partners.

Explanation / Answer

The correct answer is D). For basis purposes, partnership debt is allocated among the partners even if no partner is personally liable for the debt.

All partnership debt is allocated among the partners. Please refer to Sec. 752 of the Internal Revenue Code and related regulations which explain how to allocate partnership debt among partners for purposes of calculating the basis of their partnership interests. This calculation determines what’s often referred to as the partners’ “outside basis” in the partnership (their basis for deducting losses and receiving tax-free distributions)

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.