pp 11415 The ABC equal limited partnership in which A is a general partner and

Pp 11415 the abc equal limited partnership in which a

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Problem 2 (pp. 114–15).The ABC equal limited partnership (in which A is a general partner and B and C are limited partners) purchased an apartment building for $540,000, paying $90,000 cash (contributed equally by the partners to the partnership) and financing the balance with a $450,000 nonrecourse loan secured by the building. Assume that A, B and C are all unrelated and that the partnership holds no other assets. To what extent are each of the partners at risk if the loan is:1.(a) From a commercial bank in which none of the parties owns an interest. 44
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b. § 465(b)(6)(B): “qualified nonrecourse financing” means financing– i. (i) borrowed by T w/ respect to the activity of holding real property, ii. (ii) borrowed by T from a “qualified person” or gov’t, iii. (iii) no person is personally liable for re-pmt, and iv. (iv) not convertible. c. §§ 49(a)(1)(D)(iv); 465(b)(6)(D)(i): “qualified person” is a person in the business of lending money which is not– i. (I) a related person w/ respect to T, ii. (II) a person from which T acq’d the property, iii. (III) a person who receives a fee w/ respect to T’s investment in the property. d. Here, the loan meets the § 465(b)(6)(B) req’s; commercial lender is a “qualified person” under §49(a)(1)(D)(iv). e. Amount At Risk = $180k i. § 465(b)(1): $90k/3 = $30k contribution of money ii. § 465(b)(6)(A): $450k/3 = $150k share of liability 2. (b) From the seller of the apartment complex. a. § 49(a)(1)(D)(iv)(II): seller is not “qualified person” b. NR loan is not qualified nonrecourse financing c. Partners are not at-risk for the NR loan d. § 465(a)(1), (2): loss not allowed; carried forward e. Amount At Risk = $30k each (money contributed) 3. (c) From B’s brother, who is in the money lending business and makes the loan at a rate of interest 25% below comparable rates charged to unrelated borrowers. a. § 49(a)(1)(D)(iv)((I): “qualified person” is in the bus. of lending money and not a related person to w/ respect to T b. §§ 49(a)(1)(D)(v), 465(b)(3)(C)(i), 267(b)(1), (c)(4): “related person” includes brothers, sisters, spouse, ancestors and lineal descendants. c. Here, B’s brother is a related person w/ respect to B d. § 465(b)(6)(D)(ii): Section 49(a)(1)(D)(iv)(I) doesn’t apply if the financing is commercially reasonable and on substantially the same terms as loans involving unrelated persons e. Here, the loan was made at an interest rate that’s 25% below comparable rates f. B’s brother is not a qualified person w/ respect to B i. B’s amount at risk = $30k g. A and C may argue that “related person w/ respect to T” should be read to mean a person related to Partner A and C i. Answer is not clear ii. Even if B’s brother loans the money at this interest rate, it may be qualified nonrecourse financing to A and C 4. (d) The same as (c), above, except the loan is at regular commercial rates of interest.
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