Which of the following items decreases a partner's at-risk basis?(a) A borrowed amount, secured by property used outside the activity, contributed to the partnership by a partner.(b) Cash contributed to the partnership by the partner.(c) Cash distributed to the partner by the partnership.(d) The partner's distributive share of net gains from the partnership.

The correct answer is: (C) Cash distributed to the partner by the partnership. The basis of an asset is the amount of money that has been invested in that asset. When a partner receives cash from the partnership, the partner’s investment in the partnership decreases. Therefore, the partner’s at-risk basis in the partnership also decreases.The partner’s at-risk basis is decreased by the amount of cash withdrawn from the partnership, because the partner is no longer at risk for the amount withdrawn or the amount distributed to him. Partnership distributable cash is the amount of cash that the partnership has available to distribute to the partners. The partnership distributes this cash to the partners in proportion to their ownership interests in the partnership. The distribution of cash to the partners decreases the partners' at-risk basis in the partnership. Therefore, the answer is: (C) Cash distributed to the partner by the partnership.

Answered: Which of the following items decreases…

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter21: Partnerships

Section: Chapter Questions

Problem 6BCRQ

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Which of the following items decreases a partner's at-risk basis?

(a) A borrowed amount, secured by property used outside the activity, contributed to the partnership by a partner.
(b) Cash contributed to the partnership by the partner.
(c) Cash distributed to the partner by the partnership.
(d) The partner's distributive share of net gains from the partnership.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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