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10 September, 07:27

Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of qualified nonrecourse debt and $20,000 of debt Sue is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of both types of debt, resulting in a tax basis of $9,000 and an at-risk amount of $7,000. During the year, ABC LP generated a ($90,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount?

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  1. 10 September, 11:07
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    The $2,000 Sue's loss is disallowed due to her tax basis or at-risk amount

    Explanation:

    Since we have to compute the disallowed sue's loss based on tax or at-risk amount, so we use these amounts only in the computation part.

    The computation is shown below:

    = Tax basis - At-risk amount

    = $9,000 - $7,000

    = $2,000

    Hence, the other cost like invested amount, qualified noncourse debt, loss amount are not considered. So, it is ignored
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