Question

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 is $5,000, and he has $40,000 in wage income and $10,000 in long-term capital gains.

a. How much of Rubio’s $22,000 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?

Answer 1

a.) The Initial tax basis of Rubio's in the limited partnership is $20,000.  Rubio's $22,000 loss reduces his tax basis to zero leaving him with a $2,000 loss carryover because of the tax basis loss limitation.

b.) The initial rubio's at risk amount in the limited partnership is $15,000. The loss amount of $ 22,000 reduces Rubio's at risk amount to zero leaving him with a $ 5,000 at risk carryover ( $ 20,000 loss allowed under the tax basis limitation less the $15,000 amount Rubio's has at risk.)