Question

The partnership of Marks & Sparks sustained an ordinary loss of $42,000 in Year 1. The partnership, as well as the two partners, are on a calendar-year basis. The partners share profits and losses equally. At December 31, Year 1, Marks had an adjusted basis of $18,000 for his partnership interest, before consideration of the loss. On his Year 1 individual tax return, Marks should deduct an(a)

Ordinary loss of $18,000 j k l m n

Ordinary loss of $21,000 j k l m n

Ordinary loss of $18,000 and a capital loss of $3,000 j k l m n

Capital loss of $21,000j k l m n

Answer 1

Ordinary loss of $18,000

Step-by-step explanation:

As for the provided information the loss is shared equally be each partner.

therefore, if total loss of partnership firm = $42,000

Loss on account of each partner = $42,000/2 = $21,000

Therefore, loss as share of Mark = $21,000

But as provided the basis of Mark = $18,000

Therefore, accordingly the loss up to the amount of basis shall be sett off in the current year itself, and then thereafter the remaining loss of $21,000 - $18,000 = $3,000 shall be carried forward.