Tax court says taxpayer not at risk for DRA.

Deficit restoration agreements (DRAs) are widely used to increase basis to use partnership losses or maintain basis when capital accounts have been taken below zero. There has been substantial legal precedent in this area; this has laid the groundwork for DRAs to be a viable option for holding partners liable for a portion of the partnership's liabilities, giving them basis and allowing them to take current-year losses. Many taxpayers have relied on that precedent while drafting DRAs and using the at-risk basis created thereby. The Tax Court recently dec...

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