Question

Rubio recently invested $31,500 (tax basis) in purchasing a limited partnership interest. His at-risk amount is $23,050. In addition, Rubio’s share of the limited partnership loss for the year is $36,950, his share of income from a different limited partnership is $6,725, and he has $51,500 in wage income and $15,750 in long-term capital gains. a) How much of Rubio’s $36,950 loss is allowed considering only the tax-basis loss limitations? b) How much of the loss from part (a) is allowed under the at-risk limitations? c) How much of Rubio’s $36,950 loss from the limited partnership can he deduct in the current year considering all limitations?

Answer 1

a.

Rubio’s initial tax basis in the limited partnership is $31500. Rubio’s $35950 loss reduces his tax basis to zero leaving him with a $ 5450 loss carryover because of the tax basis loss limitation.

b.

Rubio initial at risk amount in the limited partnership is 23050. Rubio 31500 loss reduces his at risk amount to zero leaving him with a 6725 at risk carryover.

c. after applying the tax basis and at risk limitations, rubio can potentially deduct 23050 of loss. However, beacuse Rubio is a limited partner , this loss is considered a passive loss.

Therefore, Rubio may deduct this loss in the current year to the extent he was passive income.