David Purchased a 10% Capital and Profits Interest in a Partnership

question 88

Multiple Choice

David purchased a 10% capital and profits interest in a partnership this year. He does not participate in the partnership's business. David has no passive income in the current year. His distributive share of the partnership's loss is $40,000 for this year. David's Sec. 705 basis in the partnership is $32,000 and his at-risk basis is $16,000 at the end of the current year. How much of the loss can David deduct on his tax return?

• A)$0
• B)$16,000
• C)$32,000
• D)$40,000