Cal and Ann are a married couple filing a joint return.Ann earns a $700,000 salary as a bank executive.The couple has $150,000 of interest and dividend income.Cal is a 50% partner and material participant in CD Partnership.CD has incurred a $1.5 million ordinary loss in 2019,and Cal's share is $750,000.Cal's basis is large enough to absorb the loss.With respect to the partnership loss,the couple will deduct
A)$750,000.
B)$700,000.
C)$510,000.
D)$255,000.

Question

Quizplus · Accepted Answer

The couple can deduct $510,000 of the partnership loss due to the passive activity loss rules and the limitation on losses for non-corporate taxpayers. The Tax Cuts and Jobs Act limits the deduction of excess business losses to $250,000 for single filers and $500,000 for joint filers, plus any net business income. Here, the couple can deduct $500,000 plus $10,000 of net business income (from interest and dividends), totaling $510,000.

Cal and Ann Are a Married Couple Filing a Joint