Question

Dre and Bow are a wealthy couple. Dre works full-time in a marketing partnership. In the past he has contributed $100,000 of cash and property with a FMV of $75,000 and a basis of $25,000. In first 5 years of the partnership Dre’s share of the income was $35,000. However, since then there has been a string of losses. In the next few years Dre’s share of losses totaled $125,000. 2017 was a rough year and Dre’s share of loss from the partnership is $65,000.

Bow makes $375,000 in her job as an anesthesiologist. She also has invested wisely and her investments paid $38,000 in dividends and $47,000 in interest during 2017. Her investments also include a partnership, she doesn’t work for this partnership in any capacity. She contributed $75,000 to the partnership in cash as her original investment. Since then, her share of the income generated by the partnership is $40,000. In 2017, her income from the partnership was $5,000.

A) Assuming no other items, what is Bow and Dre’s AGI for 2017? If there are any suspended losses note why they are suspended.

B) In 2018 Bow’s salary remains $375,00 and her investments generate $41,000 in dividends and $47,000 in interest. However, her partnership generated a loss of $5,000. Dre’s partnership turned things around and his share of the income was $22,000. Assuming no other items, what is Bow and Dre’s AGI for 2018?

(Note: I need the solution to both the subparts)

Answer 1

Working Note:
Dre's share of Partnership profit for first 5 years	175000
In next few years, Dre's share of loss	$125,000
Net operating loss for 2017	$65,000
Loss suspended	$65,000
As in the previous two year, there is no profit, thus NOL cannot be
carried back and thus it will be carried forword to future period
Bow and Dre's AGI for 2017
Bow's Salary	$375,000
Dividend Income	$38,000
Interest Income	$47,000
Bow's Partnership share of income	$5,000
Adjusted Gross Income	$465,000
Bow and Dre's AGI for 2018
Bow's Salary	$375,000
Dividend Income	$41,000
Interest Income	$47,000
Adjusted Gross Income	$463,000
Bow's Share of loss from partnership is passive loss and can be setoff
against passive income only. Thus the loss of $5000 is suspended and
carried forward to future period
Dre's share of income is setoff against NOL carried forward.