Fonnation of a Partnership and Loss Limitation . Dan, who is
active in the management of the partnership, contributes $10,000 in cash to the
newly formed DEF Partnership for a 10% interest in the partnership. The
partners transfer no liabilities to the partner – ship. During the
partnership’s first year, DEF borrows $75,000 from a bank and is liable for
accounts payable amounting to $180,000 at the end of the current year. The DEF
Partnership incurs a $400,000 ordinary loss during the current year.
a. How much of the ordinary loss may Dan deduct on his
individual tax return?
b. What is Dan ‘s basis in his partnership interest at the
end of the current year?
c. How much of the loss (if any) carries over to future
years?
Leave a Reply