Asked by Rebecca Weege on May 02, 2024
Verified
Claudia invested $50,000 cash in the C&S General Partnership and received a 20% interest.The partnership borrowed $200,000 of full recourse debt from a local bank.Assuming that Claudia is personally liable for $40,000 if the partnership defaults on the loan,what is Claudia's at-risk amount before considering any partnership income or loss?
A) $0.
B) $40,000.
C) $50,000.
D) $90,000.
At-Risk Amount
The portion of an investment under which the investor could actually lose money, often considered in tax implications and incentives.
Full Recourse Debt
A loan in which the lender is allowed to claim against the borrower’s other assets in addition to the collateral if the borrower defaults.
- Understand the significance and use of at-risk rules in identifying deductible losses.
- Examine situations to assess the at-risk amount for a taxpayer in diverse business investments.
Verified Answer
IK
Iroka kanonMay 07, 2024
Final Answer :
D
Explanation :
Claudia's at-risk amount includes her initial cash investment of $50,000 plus her share of the recourse debt for which she is personally liable ($40,000), totaling $90,000.
Learning Objectives
- Understand the significance and use of at-risk rules in identifying deductible losses.
- Examine situations to assess the at-risk amount for a taxpayer in diverse business investments.
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