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

question 119

Essay

Clint noticed that the Schedule K-1 he just received from ABC Partnership included a $19,800 ordinary business loss allocation. His tax basis in ABC at the beginning of ABC's most recent tax year was $9,800. 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 $1,800, qualified nonrecourse debt increased from $0 to $2,800, and nonrecourse debt increased from $0 to $2,800. Finally, the Schedule K-1 Clint recently received from ABC reflected a $800 cash contribution he made to ABC during the year.
Clint is not a material participant in ABC Partnership, and he received $9,800 of passive income from another investment during the same year he received the loss allocation from ABC. How much of the $19,800 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:

Jurisdiction in Rem

A legal principle allowing courts to exercise authority over a property regardless of the owner's location.

Directed Verdict

A ruling by a court in favor of one party without the need for deliberation by the jury, usually because the evidence overwhelmingly supports one side.

Concurrent Federal Jurisdiction

The situation where both federal and state courts have the authority to hear and decide cases on the same issues.

Admiralty

Relating to maritime law, which governs nautical issues and private maritime disputes.