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

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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?


Definitions:

Dance Theater of Harlem

An American professional ballet company and school based in New York City, known for its inclusive approach to classical ballet.

Ballet Corps

The group of dancers in a ballet company who perform as an ensemble, often accompanying the principal dancers.

Dance Theater of Harlem

A renowned ballet company and school based in New York City, known for being one of the first African-American ballet companies in the world.

Ballet Corps

The group of dancers in a ballet company who perform together and are not soloists, often synchronizing movements in ensemble work.

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