Discussion:Line of credit and partnership basis
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Discussion Forum Index --> Tax Questions --> Line of credit and partnership basis
| 13 April 2007 | |
| Hello Everybody,
After searching the forum, I am not satisfied yet, but I think I know that answer...... A partnership took out a Line of Credit. They are husband and wife partners. The question is....is the partnership basis increased by the full line amount even though some of it is not being used? I would think I would use the total line of credit given. Is this a stupid question? I apologize if it is. :o) Thank you, | |
| 13 April 2007 | |
| Ms Twizz - I have the exact same scenario - if I use the total line of credit , then the partner's basis will be increased to cover his negative basis - I am not sure but seems like they are liable for the total line so it should increase the basis - any thoughts? | |
Death&Taxes (talk|edits) said: | 13 April 2007 |
| Journal entries are not my forte, but how would you get the full line of available credit on the books? | |
Www.cpa1.biz (talk|edits) said: | 13 April 2007 |
| It does look like you are liable for the amounts not taken out so this would probably be a pertpetual increase in liabilies.
If the liability inreases then so does the bank account or the drawing account. | |
Death&Taxes (talk|edits) said: | 13 April 2007 |
| I am sorry, but how are they liable for amounts not drawn yet? If they closed the doors, they would not have to pay the bank any more than they had borrowed. This concept could really be worked to death: I am liable to my brother-in-law for $50,000; see I signed an agreement that he would agree to lend me the money. | |
| 13 April 2007 | |
| Yes DT - I am having the same problem - I cannot reconcile how this would be justified - adding to basis
I am not | |
| 13 April 2007 | |
| The line of credit is like a credit card. Only the amount drawn is liable to the partners. You can't add the total line of credit to the basis if they are only liable for the amount drawn. If they don't use it, no basis added, 500.00 draw on year end bal, basis increase by 500? | |
| 14 April 2007 | |
| yes, makes sense to me.....only on the drawn amount.
Thanks everybody!!!!!! | |
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