Bart contributes $100,000 to the Fish Partnership for a 40% interest.During the first year of operations,Fish has a profit of $20,000.At the end of the first year,Fish has outstanding loans from the following banks. What is Bart's at-risk basis in Fish at the end of the first year?
A)$100,000.
B)$108,000.
C)$112,000.
D)$124,000.
E)None of the above.

Question

Bart contributes $100,000 to the Fish Partnership for a 40% interest.During the first year of operations,Fish has a profit of $20,000.At the end of the first year,Fish has outstanding loans from the following banks.  What is Bart's at-risk basis in Fish at the end of the first year?
A)$100,000. 
B)$108,000. 
C)$112,000. 
D)$124,000. 
E)None of the above.

Quizplus · Accepted Answer

Bart's initial investment was $100,000 for a 40% interest, which means Fish's total value was $250,000 ($100,000/40%). Since Fish had a profit of $20,000, Bart's share of the profit is $8,000 ($20,000 x 40%). Bart's at-risk basis is calculated as initial investment + share of profits - share of losses - share of distributions, which in this case is $100,000 + $8,000 - $0 - $0 = $108,000. Thus, the correct answer is C.

Bart Contributes $100,000 to the Fish Partnership for a 40