26. Sue invested $7,500 in the ABC Limited Partnership and received a 10 percent

Question

26. Sue invested $7,500 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $25,000 of qualified nonrecourse debt and $25,000 of debt she is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of both types of debt resulting in a tax basis of $12,500 and an at risk amount of $10,000. During the year, ABC LP generated a ($125,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount?

Multiple Choice

$3,000 disallowed because of her tax basis.

Zero; all of her loss is allowed to be deducted.

$5,000 disallowed because of her tax basis.

$2,500 disallowed because of her at-risk amount.

$5,000 disallowed because of her at-risk amount.

27. Bill would like some tax benefits for his investment expenses incurred this year. His AGI is $189,000. Currently, his expenses consist of: (1) $900 investment advice fees, (2) $1,400 unreimbursed employee business expenses (a miscellaneous itemized deduction), and (3) $500 tax return preparation fees. How much more, if any, must Bill spend for investment expenses this year before he receives any tax benefit?

Multiple Choice

More than $980.

Zero, Bill is already receiving a benefit.

More than $900.

None of the choices are correct.

More than $500.

Explanation / Answer

Answer Computation of disallowance of loss of tax basis Particular Amount Amount at tax basis $12,500 Less: Amount at risk $10,000 Disallowed loss $2,500 Working note (1) Tax basis amount $7500+(25000*10%)+($25000*10%) = $12500 (2) Amount at risk $7500+($25000*10%) = $10000

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