Question

Sue invested $9,500 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $29,000 of qualified nonrecourse debt and $29,000 of debt Sue is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of both types of debt, resulting in a tax basis of $15,300 and an at-risk amount of $12,400. During the year, ABC LP generated a ($153,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount

Answer 1

Answer:

$2,900

Explanation:

Sue invested = $9,500

Interest received in partnership = 10%

Loss allowed = $ 12,400 (At risk amount)

Tax basis (Loss allocation) = $15,300

Disallowed loss:

= Loss allocation - Loss allowed (at risk amount )

= $15,300 - $12,400

= $2,900

Therefore, $2,900 of Sue's loss is disallowed due to her tax basis or at-risk amount.