Emma is a 40% General Partner of JohnsonPartners that reported a net loss of $50,000 for the year.Emma joined the partnership on January 1 of the current year with a beginning basis of $4,000.During the year, JohnsonPartners took out a bank loan for $25,000.How much of the loss can Emma deduct on her tax return for the year?
A)$0
B)$4,000
C)$14,000
D)$20,000

Question

Quizplus · Accepted Answer

Emma can deduct her share of the partnership's loss up to her basis in the partnership. Her initial basis is $4,000, and she can add her share of the partnership's liabilities (40% of $25,000 = $10,000) to her basis, making it $14,000. Therefore, she can deduct $14,000 of the loss.

Emma Is a 40% General Partner of JohnsonPartners That Reported