What would your answer to Number 8 be if the nonrecourse debt had priority over the
LP is a limited partner and GP is a general partner of the LG partnership.
contributes $90,000 and GP contributes $10,000 to the partnership, which then gets a
$400,000 nonrecourse loan and purchases a building for $500,000.
GP is required to
make up any capital account deficit, but LP is not.
However, the partnership
agreement has a qualified income offset provision for LP and also a minimum gain
The partnership allocates 90% of all partnership items to LP
and 10% to GP, until the partnership generates minimum gain.
At that point they will
be allocated 50/50.
Is this allocation “reasonably consistent” with the allocation of
items that do have substantial economic effect?
What would your answer be if, after
the partnership generates minimum gain, items of income and loss are allocated 99%
to LP and 1% to GP?