Crystal invested $8,000 cash in CRK Partnership for a 30% general partnership interest.In its first year of operations, CRK lost $15,000.In its second year of operations, CRK lost an additional $14,000.How much of the second year's losses can Crystal deduct in that year?
A)$700
B)$2,400
C)$3,500
D)$4,200

Question

Quizplus · Accepted Answer

Crystal can deduct losses up to her basis in the partnership. Initially, her basis is $8,000. After the first year's loss, her basis is reduced by 30% of $15,000, which is $4,500, leaving her with a basis of $3,500. In the second year, she can deduct up to her remaining basis of $3,500.

Crystal Invested $8,000 Cash in CRK Partnership for a 30