Question

At the beginning of the tax year, Zach's basis for his partnership interest and his amount at risk in the partnership was $30,000. His share of partnership items for the year consisted of tax-exempt interest income of $2,000 and an ordinary loss of $44,000. He also received a distribution of $20,000 cash from the partnership during the year. He is an active general partner and has no passive income or business losses from other sources. For the tax year, Zach will report:

Answer 1

The correct answer is Ordinary loss = $12,000 and Suspended loss carry forward = $32,000.

Step-by-step explanation:

According to the scenario, the computation of given data are as follows:

As $20,000 and $2,000 are tax exempt interest income,

So, it can reduce Zach's basis in his partnership interest.

So, Ordinary loss = $30, 000 + $2,000 - $20,000 = $12,000

Suspended loss carry forward = $44,000 - $12,000 = $32,000

Hence, Zach will report the following data

Ordinary loss = $12,000

Suspended loss carry forward = $32,000