Question

A customer buys an oil and gas limited partnership interest by contributing $20,000 and signing a $20,000 non-recourse note. The customer's tax basis is

Answer 1

The customer's tax basis is:

$20,000.

Step-by-step explanation:

The non-recourse notes of $20,000 do not provide basis for the customer's tax. Since the partnership cannot recover beyond the secured property, a non-recourse note is not a qualified basis. IRS Section 752 rules apply to non-recourse liabilities. A non-recourse note provides the basis for partnership distributions but generally do not provide basis for at-risk rules.