G and H are individual partners in GH Partnership and share equally in its profits and losses.G had a basis of $5,000 in the partnership, before considering the $14,000 ordinary loss reported by GH for 2011.In 2012, the partnership reports a $6,000 ordinary gain on Form 1065.What income or loss should G properly report on his 2012 individual return? Assume that there are no other transactions that affect G's basis in the partnership for 2011 and 2012.

Question

Quizplus · Accepted Answer

G's share of the 2011 loss is $7,000, which reduces his basis to $0 (since his basis was $5,000). The excess $2,000 loss is suspended. In 2012, G's share of the $6,000 gain is $3,000, which first restores his basis to $3,000, allowing him to deduct the previously suspended $2,000 loss. Therefore, G reports $1,000 income ($3,000 gain - $2,000 suspended loss).

G and H Are Individual Partners in GH Partnership and Share