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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
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, andiv.(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 = $180ki.§ 465(b)(1): $90k/3 = $30k contribution of moneyii.§ 465(b)(6)(A): $450k/3 = $150k share of liability2.(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 financingc.Partners are not at-risk for the NR loand.§ 465(a)(1), (2): loss not allowed; carried forwarde.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 Tb.§§ 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 Bd.§ 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 personse.Here, the loan was made at an interest rate that’s 25% below comparable ratesf.B’s brother is not a qualified person w/ respect to Bi.B’s amount at risk = $30kg.A and C may argue that “related person w/ respect to T” should be read to mean a person related to Partner A and Ci.Answer is not clearii.Even if B’s brother loans the money at this interest rate, it may be qualified nonrecourse financing to A and C4.(d) The same as (c), above, except the loan is at regular commercial rates of interest.