Question

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?

Answer 1

The amount invested by Larry and at risk amount both are same of $31,000. Thus, in this case the basis and at risk hurdles will not apply. The amount Larry would be able to deduct in current year is restricted to passive activity income earned by Larry that is $1,220. The remaining loss would be carryover to next year. The deductible loss is therefore $1,220 and remaining $1,330 ($2,550-$1,220) would be passive activity loss which would be carry over to next year.

Thus, Deductible loss is $1,220.