Question

Required information [The following information applies to the questions displayed below.j Rubio recently invested $21,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is $15,700. In addition, Rubio's share of the limited partnership loss for the year is $23,300, his share of income from a different limited partnership is $5,150, and he has $41,000 in wage income and $10,500 in long-term capital gains. c. How much of Rubio's $23,300 loss from the limited partnership can he deduct in the current year considering all limitations? Answer is complete but not entirely correct. Deductible loss 5 10,550 3

What is the deductible loss?

Answer 1

There are two types of limitations to be considered tax basis loss limitation and risk limitation

Tax Basis Loss Limitation

Rubio Tax Basis in the partnership

$21,000

The Loss incurred reduces the tax basis of partnership to (23300-21000)

2300

With this Rudio has $ 2300 loss carryforward due to tax basis loss limitation

Risk Limitation

Rubio's at risk amount

$15,700

Loss in partnership

$23,300

($7,600)

Rubio's loss leads to zero risk limitation and $ 7600 at risk carryover

After applying both the rules, Rubio can deduct (7600+2300)

9900

Rubio is an limited partner and hence the loss is considered as passive loss, Rubio needs to have passive income of atleast $ 9900 to deduct the loss completely

Since Rubio has $ 5150 income from different limited partnership, Rubio can deduct loss upto $ 5150 in the current year