What is Jerry's income tax savings (rounded to the nearest dollar)for the first year if they organize the business as a partnership?
A)$0
B)$1,386
C)$4,274
D)$4,389
E)$4,655

Question

Quizplus · Accepted Answer

Jerry's share of the loss would be $13,300 ($38,000 x 35%)but the amount he can deduct in the first year is limited to his $12,950 basis [$4,200 invested + ($25,000 loan x 35%)].The excess $350 loss is carried forward.His tax savings is $4,273.50 ($12,950 x 33%).

What Is Jerry's Income Tax Savings (Rounded to the Nearest