Thanks for the reply Accountant-Man!

"This could be treated as a guaranteed payment." Possibly, since Partner Son is working and that is how a working partner gets paid. Guaranteed payments are deducted from net income and are part of total loss of $30,000. That's right. I'm assuming he'll have to treat the 12K as a guaranteed payment regardless being that he never contributed anything. That will increase the loss to $42K.

"The partnership agreement states that the son owns 49% of the partnership and the dad owns 51%. It doesn't mention anything about who contributed what and that any profits or losses will be divided according to the ownership percentage. " How does it says ownership is 49/51 but doesn't say contributions or profits and losses? I guess the best answer to that is that they did it themselves on Legalzoom. They did not fill in the blank that asks about capital contributions.

"The dad contributed around 150K during the year to get it up and running. He did not do any of the work." Was this money contributions or loans? I think this is the main question. There is not a formal note and there is nothing that mentions what was contributed to capital.

What we're trying to determine is the best way to structure the 150K from dad? 

Please correct me if I'm wrong,

If it's capital, the son will have zero basis, the dad will have 150K in basis. The dad can deduct his 15K loss on his 1040 and the son cannot. I'm thinking the bar will go under this year so any 2022 and 2023 losses will be completely lost by the son. Can they amend the agreement to state that all losses will flow to the dad? Does this meed the definition of substantial economic effect?

If it's a loan, they would have to create a formal note between the partnership and the dad that makes them both personally liable to the dad. Would this create recouse debt and allow both of them to deduct the losses? If the bar goes under this year, would the dad be able to write off the remaining amount of the bad debt? Not sure if the recourse part of it would interfere?

Thanks