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In 2018, Franco purchased a 100% interest in an auto repair shop for $100,000. The auto...

In 2018, Franco purchased a 100% interest in an auto repair shop for $100,000. The auto repair shop was operating as a partnership. Franco spent 500 hours working in the auto repair shop in 2018 and 2019. In 2018, the auto repair shop, as a whole lost $120,000. At that time, Franco loaned the company $50,000. In 2019, the business’s total profits were $10,000.

a)What is Franco’s basis in the company at the end of 2019?

b)Franco also has $40,000 in W-2 wages from his work as a welder. Can Franco use his 2018 auto repair shop loss to reduce his taxable wages?

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