In 2015, Raymona Lockhart had $3,500 of unallowed passive losses due to the unal

Question

In 2015, Raymona Lockhart had $3,500 of unallowed passive losses due to the unallowed passive loss limitations. In 2016, Amber had passive income of $2,000 from the same passive activity. How would Raymona treat the prior-year unallowed passive losses of $3,500 in 2016?

Raymona can deduct the entire prior-year passive loss of $3,500 in 2016.

Raymona can deduct $2,000 of the prior-year passive loss in 2016 and carry $1,500 of the prior-year passive loss to future years.

Raymona can deduct $1,500 of the prior-year passive loss in 2016 and carry $2,000 of the prior-year passive loss to future years. (THIS IS NOT CORRECT)

Raymona cannot deduct the $3,500 of prior-year passive losses in 2016.

On March 1, Jonah contributed $5,500 for a 10% interest in the general partnership, Sam's Snacks. Sam's Snacks took out a loan for $10,000 on May 15. Jonah's distributive share for the year was $3,800. What is his ending basis in the partnership?

A. $9,300

B. $6,880

C. $10,300

D. $19,300

Explanation / Answer

Raymona can deduct $2,000 of the prior-year passive loss in 2016 and carry $1,500 of the prior-year passive loss to future years.

Explanation: Since passive loss can be adjusted against only passive income and remaining losses is carried forward to future years, in 2016 passive income of $2000 exist so $2000 loss is deducted and remaining $1500 loss is carriied forward to future years.

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Ans is $10,300

Explanation: jonah initial basis = $5500

Add: Distributive share = $3800

Add: Share of liabilities = $1000 (10000 x 10%)

Total Basis = 10,300

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