Michael Invests in Buxus Interests, a Partnership

question 59

Essay

Michael invests in Buxus Interests, a partnership.Michael's capital contribution to the partnership consists of $10,000 cash and equipment with an adjusted basis of $120,000 (fair market value of $150,000)subject to a nonrecourse liability of $60,000.
a.Calculate the amount that Michael is at-risk in the activity after making the above contribution?
b.​​If Michael's share of the partnership loss in the year after he makes the contribution is$150,000, how much of the loss may be deducted in that year (before considering thelimitations on passive losses)? Assume the partnership had no other transactions.
c.If Michael has any nondeductible loss in part b, what may Michael do with thenondeductible loss?

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Definitions:

Private Incentives

The personal benefits or motivations that guide individuals and businesses in making decisions, often driven by the desire for profit or personal satisfaction.

Common Resource

A resource that provides users with tangible benefits, but which is available to all members of a community or society and is susceptible to overuse, leading to depletion or degradation.

Hunting Licenses

Official permits required for individuals to legally hunt wildlife in certain areas within specified periods.

Peak Times

Periods of high demand or activity within a market or service sector, often leading to higher prices or increased waiting times.