Question

Horatio and Calleigh are partners in a private investigations firm. Each partner's outside basis in the partnership will generally equal their(1) tax capital account plus their share of recourse liabilities. (2) tax capital account plus their share if liabilities. (3) book capital account plus their share of recourse liabilities. (4) book capital account plus their share of liabilities

Answer 1

The correct answer is (2).

Step-by-step explanation:

Each partner's outside basis in the partnership will generally equal their tax capital account plus their share of liabilities. This outside basis is used to determine the tax consequences of any distributions received from the partnership or any gain or loss realized on the sale or exchange of a partnership interest. The tax capital account is an account maintained by the partnership that reflects each partner's capital contributions and share of partnership profits and losses. Recourse liabilities are those for which a partner bears the economic risk of loss, while non-recourse liabilities are those for which a partner does not bear the economic risk of loss.