A number of years ago, Kay acquired an interest in a partnership in which she is not a material participant. Kay's basis in her partnership interest at the beginning of 2015 is $40,000. Kay's share of the partnership loss is $35,000 in 2015, while her share of the partnership income is $15,000 in 2016. How much may Kay deduct in 2015 and 2016, assuming that she owns no other passive activities?

deduction = 0 in 2015

Deduction = $ 15000 in 2016

balance = $20000

it is carried forward to the year 2017

Explanation:

given data

partnership interest = $40,000

partnership loss = $35,000

partnership income = $15,000

to find out

How much may Kay deduct in 2015 and 2016

solution

we can say that Loss is adjust or deduct against Profit of Kay when it makes profit during a year

so as that Kay make loss in 2015 and no profits during that year to adjust those loses against

so deduction = 0 in 2015

but

in 2016

Kay income = $ 15000

Kay adjust loss of previous year against this income to extent of income available

so Deduction = $ 15000 in 2016

and after that

here balance after deducting the passive loss is

balance = $35000 - $15000

balance = $20000

it is carried forward to the year 2017