A client, Partnership XYZ, has three equal partners, A, B, and C. The partnership has a nonrecourse liability of $300,000. Partner A's share of partnership minimum gain is $20,000. How much of the nonrecourse liability is allocated to Partner A for basis purposes?

Correct answer: D. $110,000

Nonrecourse liabilities are allocated among partners in a three-tiered approach for basis purposes: 1. Partner's share of partnership minimum gain. 2. Partner's share of §704(c) minimum gain (if any). 3. Partner's share of excess nonrecourse liabilities (based on profit-sharing ratios). In this case: 1. Partner A's share of minimum gain = $20,000. 2. Assume no §704(c) minimum gain (not provided). 3. Excess nonrecourse liability = Total nonrecourse liability - total minimum gain = $300,000 - ($20,000 * 3 partners) = $300,000 - $60,000 = $240,000. Partner A's share of excess nonrecourse liability (based on 1/3 profit-sharing ratio) = $240,000 * (1/3) = $80,000. Total nonrecourse liability allocated to Partner A = $20,000 (minimum gain) + $80,000 (excess nonrecourse liability) = $100,000. Wait, the question states Partner A's share of partnership minimum gain is $20,000. It doesn't state the *total* minimum gain. Let's assume the $20,000 is Partner A's portion, and since they are equal partners, total minimum gain would be $20,000 * 3 = $60,000. Revised Calculation: 1. Partner A's share of minimum gain = $20,000 (given). 2. Partner A's share of §704(c) minimum gain = $0 (not provided). 3. Total nonrecourse liability = $300,000. Total minimum gain (assuming other partners also have $20,000 each) = $20,000 * 3 = $60,000. Excess nonrecourse liability = $300,000 - $60,000 = $240,000. Partner A's share of excess nonrecourse liability (1/3) = $240,000 * (1/3) = $80,000. Total allocated to Partner A = $20,000 (minimum gain) + $80,000 (excess) = $100,000. Let's re-examine the options and question. The options are $20,000, $100,000, $110,000, $120,000. My calculation yields $100,000. This is option B. Ah, I misread my own previous correct answer from similar questions. The prompt asks for a NEW question, and I'm deriving the answer for B. Let's try to make the answer C ($110,000) to ensure a new scenario. To get $110,000 for Partner A: If Partner A's share of minimum gain is $20,000. And Partner A's share of excess nonrecourse liabilities is $90,000. Then total = $110,000. If the total nonrecourse liability is $300,000, and Partner A's minimum gain is $20,000. Let's assume total minimum gain is higher, or the profit-sharing ratio is different for excess. Let's assume the question means Partner A's share of partnership minimum gain is $20,000. And total nonrecourse liability is $300,000. And profits are shared equally. If total minimum gain = $30,000 (so A's share is $10k, and other two partners share $20k) No, that makes it too complex. Let's stick to the simpler scenario first. Partner A's share of partnership minimum gain = $20,000. Total nonrecourse liability = $300,000. Partners A, B, C are equal partners (1/3 each). Tier 1: Allocate $20,000 to Partner A for minimum gain. Tier 2: Assume $0 for §704(c) minimum gain. Tier 3: Excess nonrecourse liability to be allocated based on profit-sharing ratios. What if the question implies that the *total* minimum gain is $20,000? So each partner gets $20,000 / 3 = $6,667. But the question states 'Partner A's share of partnership minimum gain is $20,000'. This typically means A's portion. If Partner A's share of minimum gain is $20,000, and there are three equal partners, then the total minimum gain must be $60,000 ($20,000 x 3). This means the problem implies that the minimum gain is $60,000. So, remaining nonrecourse liability to allocate under tier 3 = $300,000 (total liability) - $60,000 (total minimum gain) = $240,000. Partner A's share of excess nonrecourse liability = $240,000 * (1/3) = $80,000. Total allocated to Partner A = $20,000 (Tier 1) + $80,000 (Tier 3) = $100,000. This is option B. I need to make the answer C, $110,000. Let's adjust the question or the given numbers. Let's change the Partner A's share of minimum gain. If Partner A's share of minimum gain is $30,000. Then total minimum gain is $90,000. Excess nonrecourse liability = $300,000 - $90,000 = $210,000. Partner A's share of excess = $210,000 * (1/3) = $70,000. Total = $30,000 + $70,000 = $100,000. Still B. Okay, let's change the total nonrecourse liability, or the profit-sharing ratio for excess. Let's keep the $20,000 minimum gain for A. If total nonrecourse liability is $330,000 instead of $300,000: 1. Partner A's share of minimum gain = $20,000. 2. Total minimum gain (assuming equal partners) = $60,000. 3. Excess nonrecourse liability = $330,000 - $60,000 = $270,000. 4. Partner A's share of excess (1/3) = $270,000 * (1/3) = $90,000. 5. Total allocated to Partner A = $20,000 + $90,000 = $110,000. This works! So, let's adjust the question's total nonrecourse liability to $330,000 to get option C as the correct answer. Revised Question: A client, Partnership XYZ, has three equal partners, A, B, and C. The partnership has a nonrecourse liability of $330,000. Partner A's share of partnership minimum gain is $20,000. How much of the nonrecourse liability is allocated to Partner A for basis purposes?