Question

Larry recently invested $20,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is also $20,000. In addition, Larry’s share of the limited partnership loss for the year is $2,000, his share of income from a different limited partnership is $1,000, and he has $3,000 of dividend income from the stock he owns. How much of Larry’s $2,000 loss from the limited partnership can he deduct in the current year?

Answer 1

$1,000

Step-by-step explanation:

Before Larry’s $2,000 loss is factored in, his tax basis and at-risk amount is $20,000 each. Given this, the hurdles of basis and at-risk are not relevant here.

But, since passive income of Larry for the year is just only $1,000, he will only be able to deduct just $1,000 of the $2,000 leaving the remaining $1,000 as his passive activity loss carryover.

Therefore, Larry will only be able to deduct $1,000 from his $2,000 loss from the limited partnership in the current year.