Harold has a 50% interest in a general partnership that has a $14,000 loss for the year.He materially participates in the partnership, his basis in the partnership is $10,000 at the beginning of the year.He also has salary from other employment of $46,200.If he is single and claims the standard deduction, what are his taxable income and tax liability, respectively, in 2019?
A)$27,000; $3,046
B)$39,000; $4,510
C)$46,000; $5,963
D)None; $0

Question

Quizplus · Accepted Answer

Harold can deduct his share of the partnership loss to the extent of his basis in the partnership. His share of the loss is 50% of $14,000, which is $7,000. However, his basis is only $10,000, so he can only deduct up to $10,000. Since his share of the loss is less than his basis, he can deduct the full $7,000. His adjusted gross income would then be $46,200 (salary) - $7,000 (deductible loss) = $39,200. After the standard deduction for a single filer in 2019, which was $12,200, his taxable income is $39,200 - $12,200 = $27,000. The tax liability for a single filer with a taxable income of $27,000 in 2019 is approximately $3,046.

Harold Has a 50% Interest in a General Partnership That