Tim invests $60,000 and Peter invests $40,000 in an entity. The entity generates

Question

Tim invests $60,000 and Peter invests $40,000 in an entity. The entity generates profits of $30,000 during the first year. At the end of the first year, the entity has non-recourse liabilities of $15,000 and recourse of $12,000. Assume any sharing of profits and losses is in accordance with the original contribution ratio. Calculate Tim’s regular basis (i.e. basis for stock, Outside Basis) for his ownership interest if the entity is:

a) An S corporation

b) A C corporation

c) A partnership

d) An LLC

Explanation / Answer

c) a partnership ratio

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