Molly Grey (single) acquired a 30 percent limited partnership interest in Beau G
ID: 2772385 • Letter: M
Question
Molly Grey (single) acquired a 30 percent limited partnership interest in Beau Geste LLP several years ago for $50,000. At the beginning of year 1, Molly has tax basis and an at-risk amount of $22,000. In year 1, Beau Geste incurs a loss of $208,500 and does not make any distributions to the partners.
In year 1, Molly's AGI (excluding any income or loss from Beau Geste) is $65,800. This includes $19,900 of passive income from other passive activities.
In year 2, Beau Geste earns income of $31,500. In addition, Molly contributes an additional $37,600 to Beau Geste during year 2. Molly's AGI in year 2 is $71,500 (excluding any income or loss from Beau Geste). This amount includes $17,800 in income from her other passive investments.
Based on the above information, complete the following tables: (Leave no answers blank. Enter zero if applicable.)
At risk amount:
initial year 1 amount;
allowed loss:
End of year 1 at-risk amount
contribution for year 2
BG income
allowed loss:
End of year 2 at-risk amount
Molly Grey (single) acquired a 30 percent limited partnership interest in Beau Geste LLP several years ago for $50,000. At the beginning of year 1, Molly has tax basis and an at-risk amount of $22,000. In year 1, Beau Geste incurs a loss of $208,500 and does not make any distributions to the partners.
Explanation / Answer
Initial Year 1 at-risk Amount - $ 22,000
Allowed Loss
Share of Molly in Beau Geste LLP = 30%
Loss incurred in Year 1 - $ 208,500
Allocable share of Beau Geste Losses to Molly = 208500 * 0.30 = $ 62,550
As per IRC code the allocable losses cannot exceed the basis
Allowed loss = Lower of Basis or allocable loss = $ 22,000
Calculation of at-risk amount at the end of the year
Initial Amount = $ 22,000
Allowed loss (subject to basis) = $22,000
End of the year 1 at risk amount = 0
Contribution to partnership in year 2 = $ 37,600
BG Income = $ 31,500
Partnership interest of Molly =50000+37600/{( 50000/30%)+37600} = 87600/204267 = 42.89% (Assuming that none of the other partners made additional contributions)
Change in basis = $ 37,600
Allocable amount of BG’s income = 31500 * 4.89% = $ 13,510
Allowed Loss = Minimum of Loss carried forward from previous year and basis
= Min of (62,500 – 22,000), 13,510 = Min of 40,500, 13,510
= $ 13,510
End of Year 2 at risk amount = End of Year 1 Basis + Contribution - Allowed Loss
= 0 + 37,600 – 13,500 = $ 24,100
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