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?

---

Definitions:

Decision Making

The cognitive process of selecting a course of action from multiple alternatives, often involving judgment or reasoning.

Perceived Value

The worth or significance a consumer assigns to a product or service, often based on how well it satisfies their needs and preferences.

Magazine Advertisement

A marketing message or campaign found within a magazine, used to promote products, services, or ideas.

Affective Forecasting

The process of predicting one's emotional state in future situations.