eonard owns a 10% interest in a partnership (not real estate) in which his at-risk amount is $42,000 at the beginning of the year. During the year, the partnership borrows $80,000 on a nonrecourse note and incurs a loss of $60,000 from operations. Leonard's at-risk amount at the end of the year is $44,000.
a. True
b. False
False
The amount a taxpayer has at risk is increased by the taxpayer's share of additional recourse debt and decreased by the share of losses from the activity. The at-risk amount is not affected by nonrecourse debt because it is not qualified nonrecourse financing. Leonard's year-end at-risk amount is $36,000 [$42,000 - (10% × $60,000 loss)].