In 2018, Liam invested $100,000 for a 25% interest in a partnership involved in an activity in which he is a material participant. The partnership reported losses of $340,000 in 2018 and $180,000 in 2019 with Liam's share being $85,000 in 2018 and $45,000 in 2019. How much of the losses can Liam deduct?
A) $0 in 2018, $0 in 2019.
B) $85,000 in 2018, $0 in 2019.
C) $85,000 in 2018, $15,000 in 2019.
D) $85,000 in 2018, $45,000 in 2019.
E) None of the above.

Question

Quizplus · Accepted Answer

Liam can deduct up to his basis in the partnership. In 2018, his basis was $100,000, so he can deduct the full $85,000 loss. In 2019, his remaining basis is $15,000 ($100,000 - $85,000), so he can only deduct $15,000 of the $45,000 loss.

In 2018, Liam Invested $100,000 for a 25% Interest in a Partnership