PROBLEM2 A and B, calendar year individuals, are equal partners in a real estate

Question

PROBLEM2 A and B, calendar year individuals, are equal partners in a real estate partnership. In the current year, the partnership had gross rental income of $250 and deductions, including depreciation of s300. To what extent is the resulting loss of $50 deductible by the partners under $704(d), if The adjusted bases of A and B for their interests in the partnership as of the last day of the current year (after adjustment for all events during the year other than the loss) are $10 and $30, respectively a) b) Same as (a) except the partnership has taxable income of $30 for the following year

Explanation / Answer

a) The adjustment of loss is shown as follows (Amount in $)

b) Adjustment of losses in the following year (Amount in $)

* Although § 704(d) states that the loss will be suspended until it is "repaid," the regulations interpret this term to include any increase in basis, include an allocation of income.

Particulars A B Beginning Basis 10 30 a) $50 loss (50% each but restricted to basis) -10 -25 Ending Basis 0 5 Suspended losses 15 0

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