Can someone give me a yay or a nay on recourse loan status

[schirallicpa]

The Partnership's main guy mortgaged the farm (literally) to give money to the new partnership to buy and construct real property.  

He loans this money to the partnership. Is it a recourse loan since he stands to lose his farm?

Please forgive me for a dumb question. This is the first time I have tried to complete a new partnership 1065 and sorting out who gave what to whom for what.  The partnership itself got a loan to complete their project and I know that is nonrecourse.  

 

[Lee B]

https://www.thetaxadviser.com/issues/2011/jul/clinic-story-10.html

[michaelmars]

A bit more complicated than you think.  First of all mortgage is Qualified NonRecourse thus is counts for basis, that's for the new property.

On the old property you have to follow the interest tracing rules.  The percentage of new money that was distributed [for new partnership] is reported separately and on schedule K line 13D.  It will flow to the k1 as such.  Then it is up to each partner to determine the use of the money they received.  Invested on a partnership, deduct on sch E, invested in the market, deduct on sch A, bought a yacht then not deductible.

[mcb39]

My husband "sold the farm" to start a Partnership with his brother in 1973.  Many years later the brother sold his half to our son.  Family owned Partnership.  That sale was one of the most difficult returns I ever did.  My research and the paperwork involved, rests in a hard-shell briefcase.  I have always treated our contribution as Recourse.  The brother contributed nothing but his talent.  In nearly 50 years, my 1065 returns have never been questioned.  Used Vehicle Sales and Service continues to exist and grow.  However, there are slightly different rules for family-owned and this is not a huge business; averaging under $250,000 Gross.  Also, it has been solvent for a long time.

[schirallicpa]

Thank you!  Let me post another dumb question.....