Final answer:
Nareh's tax basis in her partnership interest at the end of the year is -$55,000.
Step-by-step explanation:
To calculate Nareh's tax basis in her partnership interest, we need to consider her share of partnership liabilities and allocations of partnership income or loss.
At the beginning of the year, Nareh's share of partnership liabilities consists of $6,000 of recourse liabilities and $10,000 of nonrecourse liabilities. At the end of the year, her share of partnership liabilities is $6,000 of recourse liabilities and $13,000 of nonrecourse liabilities.
During the year, Nareh was allocated $65,000 of partnership ordinary business loss. Since she does not materially participate in the partnership, this loss is considered passive activity loss.
To determine Nareh's tax basis in her partnership interest, we start with her initial tax basis of $45,000 and make the following adjustments:
- Reduce the tax basis by her share of recourse liabilities at the beginning and end of the year: $45,000 - $6,000 - $6,000 = $33,000.
- Reduce the tax basis by her share of nonrecourse liabilities at the beginning and end of the year: $33,000 - $10,000 - $13,000 = $10,000.
- Reduce the tax basis by her share of the partnership ordinary business loss: $10,000 - $65,000 = -$55,000.
- As passive activity losses can only offset passive activity income, Nareh's loss cannot be used to offset her $4,000 of passive income from other sources.
Therefore, Nareh's tax basis in her partnership interest at the end of the year is -$55,000.