The MOP Partnershi ip is involved in construction activities. Patricia has an ad

Question

The MOP Partnershi ip is involved in construction activities. Patricia has an adjusted basis or her partnershi following. ip interest on January 1 of the current year of $600,000, consisting of the Capital account Share of partnership recourse debt Share of partnership nonrecourse debt200,000 S350,000 50,000 During the year, the partnership has an operating loss of $1.2 million and distributes $60,000 of cash to Patricia. Partnership liabilities were the same at the end of the tax year, and the nonrecourse debt is not "qualified nonrecourse debt." If she owns a 60% share of partnership profits, capital, and losses, and is an active ("material") participant in the partnership, how much of her share of the operating loss can Patricia deduct? What Code provisions could cause a suspension of the loss? admrd bans 600wo br uw

Explanation / Answer

Adjusted basis of Patricia calculation

Adjusted basis at the end of the previous year 600,000

less:

withdrawal and distributions of money 60,000

partner's liabilities assumed by the partnership 250,000

partner's share in losses and deductions(1.2bn*60%) 720,000

Adjusted basis at the end of year 0

Since the balance calculated is negative, it will be taken as zero.

amount of loss that is deductible is $1,200,000 * 60% = $720,000. As the share of operating loss is more than the adjusted basis, it will be $0 at the end of the year. However, Patricia can deduct full $720,000 on her K-1.

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