Question

Please give the tax ramifications to each partner and their outside basis. Also, what is the basis of each asset in the partnership on initial contribution date. Please do the breakdown of the capital account by year and all partners receive 1/3 of all profit and losses.

Each partner is considered a 1/3 partner. Partner 1 gives a building worth $100,000 and a basis of $50,000, Partner 2 gives $100,000 in cash, and Partner 3 gives $20,000 (Organizational costs) in services and $80,000 of equipment with a $30,000 basis.

The 1^st year of operation, the partnership makes $30,000, and distributes $15,000.

In 2^nd year of operation, the partnership takes a loan out on the building for $60,000. The loan is non-recourse and was made by a commercial bank at market terms. The partnership’s taxable income is $24,000 and the partners each receive a $20,000 distribution.

In the 3^rd year, the partnership losses $135,000. No partners puts in more cash. What are some of the options, if necessary, for partners that might not be able to use the losses.?

Answer 1