The crossover point for a limited partnership is the point at which all tax credits have been used up by the limited partnership and results in a tax liability for the limited partners. This has negative tax implications for investors in limited partnerships and can add to the investor’s taxable income.
If a limited partnership has used up all of its deductions and has a gain on the sale of a depreciated asset, the sale above the asset’s depreciated cost basis may subject the limited partners to a taxable recapture. This is known as the crossover point. The crossover point is also the time when the partnership begins to generate taxable income to its partners. Certain loans taken out by the partnership may have an additional impact upon the investor’s tax imlications. There are two types of loans that a partnership may take out: nonrecourse loans and recourse loans. With a nonrecourse loan, if the partnership defaults the lender has no recourse to the limited partners. With a recourse loan, in the event of the partnership’s default the lender can go aft er the limited partners for payment. A recourse loan can increase the investor’s cost base.. Be on the look out for 5 or 6 questions relating to the operation of limited partnerships on your exam. These can be among the more challenging questions for many test takers. Be sure you are ready to ace your exam with our world class textbooks, exam prep software and video training classes. You will be sure to be ready with our greenlight money back pass guarantee.
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