Question

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?

Answer 1

Step-1

Loss of 120,000 will be limited by the basis rules of §704(d)

$ 40,000

( 120,000 - 80,000 )

Step-2

Cassandra's amount at risk is $45,000, hence loss in excess of $ 45,000 i.e. $ 35,000 ( 80,000 - 45,000 ) will be suspensed under at risk rule.

Step-3

As a limited partner, the remaining $45,000 loss ( 120,000 - 40,000 - 35,000 ) is treated as a passive loss. That loss can be deducted to the extent of Cassandra’s passive income of $30,000.

Conclusion

The loss from C&C the Cassandra may deduct is $ 30,000.