Midge is a 10% limited partner in Wild Catter, an oil and gas drilling partnership. She received her partnership interest in exchange for a $10,000 investment in the partnership. The balance in her capital account as of the beginning of the current year was $10,000. She has made no additional contributions to the partnership and received no distributions. In January, a pipe burst on one of the partnership’s properties and several thousand gallons of crude oil leaked onto surrounding pastureland. The resulting damage rendered the land unusable and rendered all the partnership’s assets worthless. The landowner sued the partnership, demanding actual and punitive damages of $2,500,000. Under the terms of the partnership agreement, Midge receives 5% of partnership losses and 10% of partnership profits. She is not obligated to restore deficits in her capital account. What does Midge stand to lose if the suit is successful?
a. $2,500,000.
b. $250,000.
c. $10,000.
d. $0.