Question

Rubio recently invested $20,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is $15,000. In addition, Rubio’s share of the limited partnership loss for the year is $22,000, his share of income from a different limited partnership is $5,000, and he has $40,000 in wage income and $10,000 in long-term capital gains.

a. How much of Rubio’s $22,000 loss is allowed considering only the tax-basis loss limitations?

b. How much of the loss from part (a) is allowed under the at-risk limitations?

c. How much of Rubio’s $22,000 loss from the limited partnership can he deduct in the current year considering all limitations?

Answer 1

A. ) Rubios initial tax basis in the limited partnership is $20,000. Rubies $22,000 loss reduce his tax basis to zero leaving him with $2,000 loss varey over because of the tax basis loss limitation .

B.) Rubio initial at risk amount in the limited partnership is $15,000. Rubios $22,000 loss reduce his at risk amount to zero leaving him with a $5000 at risk Carey over ($20,000 loss allowed under the tax basis limitation less the $15,000 amount Rubio has a risk).

C.) After applying the tax basis and at risk limitation Rubic can deduct $15,000 of loss because Rubio is a limited partner and this loss is treated as possible loss. So Rubio can deduct this loss in the current year to the extent he has passive income. His passive income is $5,000 (fr another limited partnership. He may only deduct $5000 of the $15,000 loss leaving him with a $10,000 passive activity loss that can be carried forward indefinitely.