Courtney is a 50% partner in CD Partnership. Courtney and CD have calendar tax years. Courtney’s...

Courtney is a 50% partner in CD Partnership. Courtney and CD have calendar tax years. Courtney’s basis in her partnership interest is $25,000 on January 1, 2018. CD Partnership sustains an operating loss of $80,000 for 2018. CD Partnership earns business taxable income of $70,000 for 2019.

How much can Courtney take as a business loss on her 2018 tax return? _____________________
What is Courtney’s partnership interest basis on December 31, 2018? _______________________
What is Courtney’s taxable income in 2019? ___________________
What is Courtney’s partnership interest basis on December 31, 2019? ____________________

Expert Solution

a) For 2018, CD partnership have a loss of $80,000. Assuming CD partnership has no other expenses then interest of courtney, the business loss of CD partnership will be $80,000 + $25,000 = $105,000. Now Courtney has a 50% partnership share in the CD partnership, so the amount of Courtney's business loss will be 50% of 105,000 = $52,500. After adjusting the interest with her losses, the actual loss that Courtney can take as a business loss on her 2018 tax return will be $40,000 - $25,000 = $15,000.

b) As Courtney share a loss of $52,500 of the business, which is more than her current basis. The new basis of interest will be decreased to zero(0) on 31 December 2018.

c) On 2019, CD partnership earned a business taxable income of $70,000. And the portion of Courtney will be 50% of the amount, that is $35,000. Courtney has a loss in previous year of $15,000. So the adjusted taxable income of Courtney will be $35,000 - $15,000 = $20,000.

d) Since Courtney has $35,000 as a share of profit, her basis will be also increased to $35,000 from zero

ekkarill92 answered 1 year ago

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