Question 47

1. Determination of whether a legal entity is a variable interest entity LO2 Assume a Legal Entity's capital structure consists of the following accounts: General partner capital. Total capital ...40,000 $400,000 A Reporting Company is the sole general partner of the Legal Entity. The limited partnership capi- tal was contributed by unaffiliated individual investors recruited by a regional boutique investment bank. The Reporting Company is paid a $30,000 management fee. The limited partners expect the partnership to be highly successful over the next five years. The investment bank estimated that the distribution of income to these investors should be at least $50,000 during that time period. What is the maximum amount of expected losses that the Legal Entity can expect to sustain without being considered a variable interest entity (VIE)? Why