Clint Noticed That the Schedule K-1 He Just Received from ABC

question 12

Essay

Clint noticed that the Schedule K-1 he just received from ABC Partnership included a $20,000 ordinary business loss allocation. His tax basis in ABC at the beginning of ABC's most recent tax year was $10,000. Comparing the Schedule K-1 he recently received from ABC with the Schedule K-1 he received from ABC last year, Clint noted that his share of ABC partnership debt changed as follows: recourse debt increased from $0 to $2,000, qualified nonrecourse debt increased from $0 to $3,000, and nonrecourse debt increased from $0 to $3,000. Finally, the Schedule K-1 Clint recently received from ABC reflected a $1,000 cash contribution he made to ABC during the year.Clint is not a material participant in ABC Partnership, and he received $10,000 of passive income from another investment during the same year he received the loss allocation from ABC. How much of the $20,000 loss from ABC can Clint deduct currently, and how much of the loss is suspended because of the tax basis, at-risk, and passive activity loss limitations?

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Definitions:

Dietary Source

Any food or substance from which nutrients are obtained to support the body's needs.

Proteins

Large molecules composed of amino acids, essential for the structure, function, and regulation of the body's tissues and organs.

Protein-digesting Enzyme

An enzyme that breaks down proteins into smaller peptides or amino acids, essential for the digestion and absorption of protein.

Pancreatic Lipase

An enzyme produced by the pancreas that breaks down fats into fatty acids and glycerol during digestion.