The debt obligations of partnerships are allocated among the partners and are included in the determination of a partner’s basis. Among other things, partnership basis is important because it allows for the deduction by partners of their allocable share of partnership losses. Under existing regulations, partnership liabilities are generally divided into two categories: recourse and nonrecourse.
A partnership liability is recourse to the extent that a partner is deemed to bear the ultimate “economic risk of loss” in the event the partnership’s assets become worthless. Recourse debts are allocated among the partners based on who bears this risk of loss. The …read more
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