Which one of the following is a true statement regarding the allocation of partnership debt among the partners for purposes of calculating basis?
A) No debt is allocated to LLC members because they are not liable for entity debts.
B) Nonrecourse debt is not allocated to general partners unless they personally guarantee the debt.
C) In a limited partnership, debt is only allocated to general partners.
D) In a limited liability partnership, debt is allocated among the managing partners, but not the partners with "limited liability."
E) For basis purposes, partnership debt is allocated among the partners even if no partner is personally liable for the debt.

Question

Quizplus · Accepted Answer

For purposes of calculating basis, partnership debt is allocated among the partners even if no partner is personally liable for the debt. This is because partnership debt represents a liability of the partnership, and each partner has a proportionate share of the partnership's liabilities. The allocation of partnership debt affects a partner's basis in the partnership, which in turn affects the partner's share of partnership losses and other tax attributes. Nonrecourse debt is also allocated among the partners, but special rules apply to the allocation of deductions based on nonrecourse liabilities.

Which One of the Following Is a True Statement Regarding