Jay has a tax basis of $14,000 in his partnership interest at the beginning of t

Question

Jay has a tax basis of $14,000 in his partnership interest at the beginning of the partnership tax year. The following amounts of partnership debt were allocated to Jay and are included in his beginning of the year tax basis: (1) recourse debt - $3,000, (2) qualified nonrecourse debt - $1,000, and (3) nonrecourse debt - $500. If Jay is allocated a $15,000 loss for the current year, how much of the loss will be suspended under the tax basis and at-risk limitations?

a. $500, $1,000

b. $1,000, $500

c. $0, $0

d. $14,000, $1,000

Explanation / Answer

Details Amt $ Jay's Tax basis in the partnership=                        14,000 Loss Allocated to Jay in the current Year                        15,000 So Loss suspensed due to Tax basis limitation=                          1,000 Non recourse debt of Jay                              500 So At risk amount =$14000-$500=                        13,500 Remaining loss not suspended=                        14,000 So out of $14000 loss not suspended , an amount of $500 will be further suspended for at risk limitation. So Jay could deduct only $13500 loss after this. So correct option is b . $1000, $500

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