Question

During 20X1 Beth earned a salary of $150,000. In 20X1, she invested $40,000 for a 20% interest in a Grady Memorial Hospital, a limited partnership. Beth does not material participate in this activity. Operations of the activity result in a loss of $325,000, of which Beth’s share is $65,000. For her 20X1 return, would Beth be able to deduct any of the loss relating to this activity? If, so how much?

Answer 1

Summary of Question : During the year 2011 Beth earned a salary of $ 1,50,000

She invested $ 40,000 for a 20 % interest in a Grady Memorial Hospital, a limited partnership.

Operations of the activity result in a loss $3,25,000 of Beth's share is $65,000 in loss.

Solution:

Related Provision : According to US CODE §465 "An Individual engaged in an activity to which this section applies, any loss form such activity for the taxable year shall to be allowed only to the extent of aggregate amount with respect to which the taxpayer is at risk."

So Answer will be Yes, Beth would be able to deduct the loss relating to this activity to the extent of $40,000 in the year 2011. And remaining amount of $25,000 for share of loss will be carried forward to the next year for deduction.

Conclusion:

For Beth's 2011 return, Beth would be able to deduct $40,000 at risk in relation to activity. However the loss of $ 25,000 ($40,000 Investment - $65,000 Share of loss) would be nondeductible from her Return of the year 2011. This amount of $25,000 would be carried over to year 2012.