M is a 25 percent limited partner in an oil and gas partnership.He acquired his interest in the partnership by contributing $5,000 cash and land with an adjusted basis to him of $6,000 and a fair market value of $10,000.The partnership has outstanding recourse debt of $30,000 and outstanding nonrecourse debt of $80,000 on December 31, 20X1 and 20X2.For 20X1 the partnership produced a loss of $100,000.Ignoring the passive loss rules, how much of this loss may he deduct?

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Quizplus · Accepted Answer

The correct answer is A.The partner's share of the partnership loss is $25,000 (25% x $100,000). However, the partner's basis in the partnership is only $11,000 ($5,000 cash + $6,000 adjusted basis of land). Therefore, the partner's deductible loss is limited to $11,000.

M Is a 25 Percent Limited Partner in an Oil