Question

John, a limited partner of Candy Apple, LP, is allocated $36,500 of ordinary business loss from the partnership. Before the loss allocation, his tax basis is $26,500 and his at-risk amount is $16,500. John also has ordinary business income of $26,500 from Sweet Pea, LP, as a general partner and ordinary business income of $9,100 from Red Tomato as a limited partner. How much of the $36,500 loss from Candy Apple can John deduct currently

Answer 1

$9100

Step-by-step explanation:

loss form candy = $36500

tax basis before loss = $26500

passive losses are deducted from passive income this is the rule for a limited partner because limited partners do not participate actively in the management of the business hence the earn passively.

At risk amount as a limited business partner ( $16500) - ordinary business income from red tomato ( passive income as a limited partner )($9100)

he can currently deduct $9100 and the rest will be carried over