The MOP Partnership Is Involved in Construction Activities

question 64

Essay

The MOP Partnership is involved in construction activities. Patricia has an adjusted basis for her partnership interest on January 1 of the current year of $600,000, consisting of the following:
During the year, the partnership has an operating loss of $1.2 million and distributes $60,000 of cash to Patricia. Partnership liabilities were the same at the end of the tax year, and the nonrecourse debt is not "qualified nonrecourse debt." If she owns a 60% share of partnership profits, capital, and losses, and is a material participant in the partnership, how much of her share of the operating loss can Patricia deduct? What Code provisions could cause a suspension of the loss? How would your answer change if MOP were an LLC and Patricia had not personally guaranteed any of the debt?

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Definitions:

Collective Unconscious

A concept in Jungian psychology referring to the part of the unconscious mind which is derived from ancestral memory and experience and is common to all humankind.

Sigmund Freud

The founder of psychoanalysis, a theory of personality and therapeutic method that emphasizes unconscious motivations and conflicts.

Karen Horney

A German-American psychoanalyst known for her theories on neurosis, personality, and the importance of social relationships in mental health.

Freudian Theory

Freudian Theory encompasses the ideas proposed by Sigmund Freud, emphasizing unconscious mental processes, sexuality, and the psychological roots of dysfunction.