Question

Partner Kingsly’s outside basis is $100. He actively participates in the business. His K-1 shows a $150 loss on line 1 ordinary business income or loss. How much of the loss can Kingsley deduct on his personal tax return

Answer 1

Given Partner Kingsly's Outside basisis $100. He actively Participates in Business.

He has a Partnership loss of $150.

According to IRS, any loss incurred form partnership Business is deductible to the exetent of partners Adjusted tax basis in the partnership at the end of the year. Any losses which exceeds that limit is carried forward for the next year.

Here, Kingsly's Partnership basis is $100. Any losses incurred is allowed to the extent of $100 only. So, the loss of $100 can be deducted as a loss from partnership and the excess amount of $50 ($150 - $100) is Carried forward to the next year.