Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of qualified nonrecourse debt and $20,000 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 $9,000 and an at-risk amount of $7,000. During the year, ABC LP generated a ($90,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount?

Question

Amaris Morton

Business

13 August, 23:49

Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of qualified nonrecourse debt and $20,000 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 $9,000 and an at-risk amount of $7,000. During the year, ABC LP generated a ($90,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount?

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Houston Walsh · Answer 1

The $2,000 Sue's loss is disallowed due to her tax basis or at-risk amount

Explanation:

Since we have to compute the disallowed sue's loss based on tax or at-risk amount, so we use these amounts only in the computation part.

The computation is shown below:

= Tax basis - At-risk amount

= $9,000 - $7,000

= $2,000

Hence, the other cost like invested amount, qualified noncourse debt, loss amount are not considered. So, it is ignored