Hello, Taxpayer and father are limited partners in an LLC that owns real estate. real estate had mortgage of $ 2 million and they refinance an extra $3 million so now the total mortgage is $ 5 million. They took the extra 3 million refinanced and put it into their bank accounts. Both taxpayer and dad have Qualified Non Recourse Debt basis is of $1.7 million each and an ending capital account of $ 1.1 million each. Is the $1.5 million they each put into their bank account taxable? Does qualified Non recourse debt count as basis?
Would debt basis go down?
Would taxable capital gain be the $1.5 million deposit less $1.1 million basis ?