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On January 1, Katie pays $2,000 for a 10% capital, profits, and loss interest in a partnership, which has recourse

liabilities of $20,000. The partners share economic risk of loss from recourse liabilities in the same way they share partnership losses. In the same year, the partnership incurs losses of $6,000 and the recourse liabilities increase by $5,000. Katie and the partnership use a calendar tax year-end. What is Katie s basis at year-end?

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