Question

Eve purchases a 20% partnership interest but does not participate in the partnership’s business. Eve owns...

Eve purchases a 20% partnership interest but does not participate in the partnership’s business. Eve owns no other passive investments. Her Section 704(d) basis in the partnership = $80,000. Of this amount, $70,000 is at risk. Eve’s distributive share of the partnership’s loss for the current year =$60,000. Eve can deduct:

a.

$60,000

c.

$70,000

b.

$80,000

d.

$0

Homework Answers

Answer #1

Given in Question -

Eve's adjusted tax basis in the partnership under Sec. 704(d) is $80,000

Eve's risk at course is $70,000

Eve's share of loss in the partnership for the current year is $60,000 .

Sec. 704(d) states that a partner’s share of loss is allowable to the extent of the partner’s adjusted tax basis in the partnership at the end of the year in which such loss occurred. Any losses in excess of the tax basis are disallowed and carried forward.

Further, Sec. 465 states that a partner can only deduct losses to the extent of partner risk at course for such loss.

In the given case, Eve's share of loss in the partnership ($60,000) is less than the Eve's adjusted tax basis in the partnership ($80,000) and Eve's risk at course ($70,000).

Hence, Eve can deduct his entire share of the partnership’s loss of $60,000 for the current year.

So, the correct option is a. $ 60,000

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Rhonda owns an interest in a limited partnership (a passive activity), and her share of the...
Rhonda owns an interest in a limited partnership (a passive activity), and her share of the partnership's loss is $26,000. Her tax basis in the partnership is $27,000, and her at-risk amount is $21,000. In addition to the loss from the partnership, Rhonda has $60,000 of income from her salary, $2,000 of interest from corporate bonds, and $29,000 of income from another limited partnership (a passive activity). What amount of the partnership loss may Rhonda deduct in the current year?...
2. A number of years ago, Kay acquired an interest in a partnership in which she...
2. A number of years ago, Kay acquired an interest in a partnership in which she is not a material participant. Kay’s basis in her partnership interest at the beginning of 2-17 is $40,000. Kay’s share of partnership loss is $35,000 in 2017, while her share of the partnership income is $15,000 in 2018. How much may Kay deduct in 2017 and 2018, assuming that she owns no other passive income.
Stella owns a 55% interest in a partnership. The partnership purchases land from Stella for $70,000...
Stella owns a 55% interest in a partnership. The partnership purchases land from Stella for $70,000 when her basis in the land is $100,000. The partnership also purchases equipment from Stella, which it subsequently places in service for use in its operations, for $25,000 when her basis in the equipment is $20,000. The equipment was a capital asset in Stella's hands. What basis in the land and equipment does the partnership take on? What is Stella's built in gains or...
Alfonso began the year with a tax basis in his partnership interest of $30,000. His share...
Alfonso began the year with a tax basis in his partnership interest of $30,000. His share of partnership debt at the beginning and end of the year consists of $4,000 of recourse debt and $6,000 of nonrecourse debt. During the year, he was allocated $40,000 of partnership ordinary business loss. Alfonso does not materially participate in this partnership and he has $1,000 of passive income from other sources. a. How much of Alfonso’s loss limited by his tax basis? b....
20. Larry recently invested $28,500 (tax basis) in purchasing a limited partnership interest. His at-risk amount...
20. Larry recently invested $28,500 (tax basis) in purchasing a limited partnership interest. His at-risk amount is also $28,500. In addition, Larry’s share of the limited partnership loss for the year is $2,425, his share of income from a different limited partnership is $1,170, and he has $3,850 of dividend income from the stock he owns. How much of Larry’s $2,425 loss from the limited partnership can he deduct in the current year?
1. Rubio recently invested $20,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount...
1. Rubio recently invested $20,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is $15,000. In addition, Rubio’s share of the limited partnership loss for the year is $22,000, his share of income from a different limited partnership was $6,000, and he had $40,000 in wage income and $10,000 in long-term capital gains. How much of Rubio’s $22,000 loss from the limited partnership can he deduct in the current year considering all limitations? 2. Anwar owns a...
Larry recently invested $31,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is...
Larry recently invested $31,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is also $31,000. In addition, Larry’s share of the limited partnership loss for the year is $2,550, his share of income from a different limited partnership is $1,220, and he has $4,100 of dividend income from the stock he owns. How much of Larry’s $2,550 loss from the limited partnership can he deduct in the current year? Deductible loss?
Cassandra is a 10% limited partner in C&C, Ltd. Her basis in the partnership is $80,000...
Cassandra is a 10% limited partner in C&C, Ltd. Her basis in the partnership is $80,000 and she has an at risk investment of $45,000.   She also has a passive income from another investment of $30,000. Cassandra allocated share of C & C loss for the year is $120,000. How much of the loss from C&C may Cassandra deduct?
J owns an 80% interest in the capital and profits of the JL partnership. On April...
J owns an 80% interest in the capital and profits of the JL partnership. On April 1, 20x1, J bought from the partnership a warehouse that had been used in the business at its FMV of $60,000. The partnership's adjusted basis was $85,000. For the year ended Dec 31, 20x1, JL's net income was $105,000 after the $25,000 loss on the sale of the warehouse. What is J's share of the partnership's ordinary income for 20x1? A. $64,000 B. $84,000...
Producer owns both a 40% interest as a general partner and a 20% interest as a...
Producer owns both a 40% interest as a general partner and a 20% interest as a limited partner in PG-13 Associates, a motion picture production partnership which also pays Producer a $100,000 annual salary for her services as a full-time (1,500 hours per year) producer. After deducting Producer’s salary, the partnership has a $300,000 net loss in the current year. Producer’s aggregate outside basis for her partnership interests at the beginning of the year is $350,000. Producer’s outside basis is...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT