[TNTTN]

The following condensed balance sheet is presented for the partnership of Alfa and Beda, who share profits and losses in the ratio of 60:40, respectively

Cash $ 45,000
Other assets 625,000
Beda, loan 30000
$700,000
Accounts payable 120,000
Alfa, Capital 348000
Beda, Capital 232000
700,000
Instead of admitting a new partner, Alfa and Beda decide to liquidate the partnership. If the other assets are sold for $500,000, what amount of the available cash should be distributed to Alfa?

Can somebody please explain why the 30k loan would reduce Beda’s capital account by the full amount?

[alloverit]

Yes.

It was a partnership asset (receivable) but a personal liability (payable) for Beda. Upon dissolution of the partnership, it basically became a distribution to Beda. Distributions lower basis and his capital account was reduced by the full amount.

Hope that helps

[TNTTN]

Oh, so it means Beda borrowed the loan from the partnership? OMG, it makes sense now. I always thought it was the other around >.<. Thank you very much 🙂

[Adam]

1065 Recourse loans increase partners basis in the partnership. =Outside Basis
Nonrecourse loans are shared evenly among st partners and are considered =inside basis.

Upon liquidation the partners outside basis has to equal zero as that is what the inside basis will be..

You're welcome for re-confusing you 🙂

[Asja]

@adam lmao

Umm…what is outside basis and inside basis again?

Sounds very farmiliar…

[Author]

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