Question
(Please explain in detail and don't forget questions 3 and 4. Thank you!) The GL limited partners was organized at the beginning of the current
(Please explain in detail and don't forget questions 3 and 4. Thank you!)
The GL limited partners was organized at the beginning of the current year. G, the general partner, contributed $10 for a 10 percent interest in profits, losses and capital, and L, as limited partner, received a 90 percent interest in profits, losses and capital in exchange for a capital contribution of $90. The partnership immediately purchased a rental apartment building for $1,000, paying $100 in cash and issuing a $900 purchase money note, with interest payable currently and a lump-sum principal payment due in 20 years. Determine each partners initial outside basis under each of the following alternatives:
- The note is recourse, and hence the partnership (and G as its general partner) is personally liable on the note. As a limited partner, L is required to make no additional capital contributions beyond the $90 he contributed upon formation. L has no personal liability with respect to the note.
- Same as (a), except that under the partnership agreement L, as the limited partner is obligated to contribute additional capital of $900 to the partnership in the future (making the total required capital from L $990).
- Same as (a), except that L has assumed and promised to pay the entire note as it becomes due. Assume that the holder of the mortgage could proceed directly against L as well as G and the partnership if the note is not paid. Also assume that if the holder of the mortgage sued G or the partnership for payment, G and the partnership would sue L for the same amount since Ls assumption made him ultimately liable on the debt.
- Same as (a), except that L has guaranteed the note in a side agreement directly with the holder of the mortgage.
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