In the current year, Don has a $55,000 loss from a business he owns.His at-risk amount at the end of the year, prior to considering the current-year loss, is $36,000.He will be allowed to deduct the $55,000 loss this year if he is a material participant in the business.

Question

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Don can only deduct losses up to the amount he is at risk for in the business, which is $36,000, regardless of his participation level.

In the Current Year, Don Has a $55,000 Loss from a Business