Tax Memo

Facts

– Dolores, is a limited partner in the Houston Hopes partnership.
– Under terms of Dolores agreement, she has to make a $50,000 contribution to capital this year because the general partners were unable to meet the entity’s operation expenses.
– Dolores’s basis before the contribution was $40,000 but her at-risk amount was zero because of her being a limited-partner and her prior-year pass through losses.
Question Presented
What is Dolores at-risk amount after her $50,000 contribution this year?
Short Answer
Dolores will increase her basis in the partnership by $50,000, making her new basis $90,000. Her at-risk amount will also increase by $50,000. Assuming there are no losses that would decrease her at-risk amount this year, Dolores will have a new at-risk of $50,000.
Analysis

Question:
Dolores is a limited partner in the Houston Hopes partnership. This year, she was forced under the terms of the agreement to make a $ 50,000 contribution to capital because the general partners were unable to meet the entity’s operating expenses. Dolores’s basis in the partnership prior to the contribution was $ 40,000, but her at-risk amount was zero because of her limited-partner status and her prior-year pass-through losses. What is her at-risk amount after the $ 50,000 cash call?

SOLUTION:

Partners frequently enter into binding agreements that require them to make contributions in the future. They do not affect the at-risk of the partner until the actual contribution is made. At the time of the contribution, Dolores will increase her basis in the partnership by $50,000 and her amount of at-risk will also increase by $50,000. Assuming no suspended losses that would decrease her at-risk, Dolores will have a new at-risk of $50,000. (RIA, FTC – Keywords: partnership contribution at-risk; M-4584 )

Code §465

Regulations Prop Reg §1.465-22

Cases Pritchett, 60 AFTR 2d 87 5569