In the current year, Rich has a $40,000 loss from a business he owns.His at-risk amount at the end of the year, prior to considering the current year loss, is $24,000.He will be allowed to deduct the $40,000 loss this year if he is a material participant in the business.

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Quizplus · Accepted Answer

A taxpayer can only deduct losses up to the amount they have at risk in the business. Since Rich's at-risk amount is $24,000, he can only deduct up to that amount, not the full $40,000 loss.

In the Current Year, Rich Has a $40,000 Loss from a Business