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    Arielle

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    VSRI1993
    Jenna had $45,000 tax basis in her partnership interest at the beginning of the year which increased to $48,000 due to an increase in her share of nonrecourse debt. She was allocated $65,000 in partnership loss for the year. $48,000 of the loss was not limited by her tax basis, leaving $17,000 limited. Of the remaining $48,000 loss, $13,000 was limited by her at-risk amount of $35,000. As a passive investor, Jenna could only deduct $4,000 of her $35,000 remaining loss against other passive income, so $31,000 was limited by passive activity loss rules.

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    Arielle

    Uploaded by

    VSRI1993
    954 views2 pages
    Jenna had $45,000 tax basis in her partnership interest at the beginning of the year which increased to $48,000 due to an increase in her share of nonrecourse debt. She was allocated $65,000 in partnership loss for the year. $48,000 of the loss was not limited by her tax basis, leaving $17,000 limited. Of the remaining $48,000 loss, $13,000 was limited by her at-risk amount of $35,000. As a passive investor, Jenna could only deduct $4,000 of her $35,000 remaining loss against other passive income, so $31,000 was limited by passive activity loss rules.

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    Jenna had $45,000 tax basis in her partnership interest at the beginning of the year which increased to $48,000 due to an increase in her share of nonrecourse debt. She was allocated $65,000 in partnership loss for the year. $48,000 of the loss was not limited by her tax basis, leaving $17,000 limited. Of the remaining $48,000 loss, $13,000 was limited by her at-risk amount of $35,000. As a passive investor, Jenna could only deduct $4,000 of her $35,000 remaining loss against other passive income, so $31,000 was limited by passive activity loss rules.

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    © All Rights Reserved
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    954 views2 pages

    Arielle

    Uploaded by

    VSRI1993
    Jenna had $45,000 tax basis in her partnership interest at the beginning of the year which increased to $48,000 due to an increase in her share of nonrecourse debt. She was allocated $65,000 in partnership loss for the year. $48,000 of the loss was not limited by her tax basis, leaving $17,000 limited. Of the remaining $48,000 loss, $13,000 was limited by her at-risk amount of $35,000. As a passive investor, Jenna could only deduct $4,000 of her $35,000 remaining loss against other passive income, so $31,000 was limited by passive activity loss rules.

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    of 2

    Jenna began the year with a tax basis of $45,000 in her partnership interest.

    Her
    share of partnership debt consists of $6,000 of recourse debt and $10,000 of
    nonrecourse debt at the beginning of the year and $6,000 of recourse debt and
    $13,000 of nonrecourse debt at the end of the year. During the year, she was
    allocated $65,000 of partnership ordinary business loss. Jenna does not
    materially participate in this partnership and she has $4,000 of passive income
    from other sources.

    a. How much of Jennas loss is limited by her tax basis?

    Loss limited by tax basis 17000


    As Jennas share of nonrecourse debt climbed by $3,000 during the year, thus
    basis prior to any loss allocation is $48,000 ($45,000 beginning tax basis + $3,000
    rise in nonrecourse debt allocation). Hence, $48,000 of Jenna $65,000 loss
    allocation is not limited by her tax basis and the balance $17,000 is limited and
    carried over to the following year
    b. How much of Jennas loss is limited by her at-risk amount?

    Loss limited by at risk $13000


    Of the total amount of $48,000 loss not already limited by Jennas tax basis,
    $13,000 is limited as Jennas at-risk amount is only $35,000 ($48,000 regular tax
    basis minus $13,000 nonrecourse debt that was not allowed in calculating the at-
    risk amount at the end of the year). Therefore, $35,000 of loss remains after the
    tax basis and at-risk limitations, and Jenna has a amount of $13,000 at-risk
    carryover.

    c. How much of Jennas loss is limited by the passive activity loss rules?

    Loss limited by passive activity $31000


    As Jenna doesnt materially participate in the partnership, thus may only deduct
    the $35,000 loss remaining after the tax basis and at-risk limitations to the extent
    Jenna's has passive income from other sources. Therefore, Jenna is allowed to
    deduct $4,000 of the $35,000 loss currently and may have a $31,000 passive
    activity loss carryover

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