Question

Ladonna and jesse are each a 50% general partner in couture clothiers. at the beginning of 2022, ladonna had an outside basis of $55,000. on february 3, 2022, the partnership incurred $30,000 in recourse debt to finance the purchase of some new industrial sewing machines. what is ladonna's outside basis immediately after this purchase?

O $40,000
O $55,000
O $70,000
O $85,000

Answer 1

LaDonna's outside basis in the partnership increases by her share of the incurred debt. Since the partnership took on $30,000 in recourse debt and LaDonna is responsible for 50% of it, her outside basis increases by $15,000, resulting in a new outside basis of $70,000.

option c is the correct

Step-by-step explanation:

The subject of this question is regarding the calculation of a partner's outside basis in a partnership after the incurrence of recourse debt. In this scenario, LaDonna is a 50% general partner in Couture Clothiers and had an initial outside basis of $55,000. When the partnership incurred $30,000 in recourse debt, her share of this liability as a 50% partner would be $15,000 (50% of $30,000). To calculate her new outside basis immediately after this purchase, we add this liability to her initial outside basis.

LaDonna's initial outside basis: $55,000

Share of incurred debt she is responsible for: $15,000

LaDonna's new outside basis: $55,000 + $15,000 = $70,000