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

question 42

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, the at-risk, and the passive activity loss limitations?

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Definitions:

Sensory Cortex

Part of the brain responsible for receiving and interpreting sensory information from different parts of the body.

Corticospinal Tract

A collection of neurons in the brain that project to the spinal cord and are involved in motor control.

Lateral Spinothalamic Tract

A neural pathway in the spinal cord responsible for transmitting pain and temperature sensations to the brain.

Head Control

The ability to hold and move the head in a stable and controlled manner, a developmental milestone in infants.