information:extraction
Example

To determine each partner's economic risk of loss, a constructive liquidation analysis must be performed. The $100,000 note is deemed to become due. The partnership's assets become worthless and are sold for no consideration. This results in a $120,000 loss to the partnership, which is split equally between A and B. As a result of each A and B taking a $60,000 distributive share of the loss, their respective capital accounts are decreased by $60,000 from $10,000 to ($50,000). To restore these negative capital account balances to $0.00 in a deemed liquidation of their partnership interests, A and B would have to contribute $50,000 each to the partnership. Hence, each A and B bears the economic risk of loss for $50,000 of the partnership's recourse debt. A and B's outside bases, therefore, are increased by $50,000 from $10,000 when AB becomes obligated on the $100,000 note, giving each partner an outside basis of $60,000.