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

question 21

Essay

Clint noticed that the Schedule K-1 he just received from ABC Partnership included a $19,600 ordinary business loss allocation. His tax basis in ABC at the beginning of ABC's most recent tax year was $9,600. 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 $1,600, qualified nonrecourse debt increased from $0 to $2,600, and nonrecourse debt increased from $0 to $2,600. Finally, the Schedule K-1 Clint recently received from ABC reflected a $600 cash contribution he made to ABC during the year.
Clint is not a material participant in ABC Partnership, and he received $9,600 of passive income from another investment during the same year he received the loss allocation from ABC. How much of the $19,600 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:

Profit-Maximizing

A strategy or goal aimed at achieving the highest possible profit through adjusting production levels, prices, or other factors.

Marginal Revenue

Refers to the additional income generated from selling one more unit of a good or service.

Marginal Revenue

The additional revenue that a firm receives from selling one more unit of a good or service.

Economic Profit

The discrepancy between gross revenue and comprehensive costs, inclusive of both apparent and implied expenses.