Question

A number of years ago, Lee acquired a 20% interest in the BlueSky Partnership for $60,000. The partnership was profitable through 2014, and Lee's amount at risk in the partnership interest was $120,000 at the beginning of 2015. BlueSky incurred a loss of $400,000 in 2015 and reported income of $200,000 in 2016. Assuming that Lee is not a material participant, how much of his loss from BlueSky Partnership is deductible in 2015 and 2016? Consider the at-risk and passive loss rules, and assume Lee owns no other passive investments.

If an amount is zero, enter "0".

Lee's share of BlueSky's loss in 2015 is $ ------- . Of this loss, $--------- can be deducted under the at-risk rules, and $------- can be deducted under the passive loss rules. In 2016, he may deduct $-------- of his suspended loss against the passive income. This leaves a $-------- suspended loss at the end of 2016.

Answer 1

Answer:

Explanation:

To calculate the loss in 2015:

$400,000*20% = $80,000

To calculate passive income in 2016:

200,000*20% = $40,000

At risk amount is $120,000 - $80,000(loss) + $40,000(income) = $80,000

In 2016 $40,000 of $80,000 suspended loss may be deducted against the passive income: $80,000 - $40,000 [suspended loss]