In 2012, Pearl invests $80,000 for a 10% partnership interest in an activity in which she is a material participant.The partnership reports losses of $500,000 in 2012 and $450,000 in 2013.Pearl's share of the partnership's losses is $50,000 in 2012 and $45,000 in 2013.How much of the losses can Pearl deduct?

Question

Quizplus · Accepted Answer

Pearl can deduct up to her basis in the partnership. In 2012, her basis is $80,000, so she can deduct the full $50,000 loss. In 2013, her remaining basis is $30,000 ($80,000 - $50,000), so she can only deduct $30,000 of the $45,000 loss.

In 2012, Pearl Invests $80,000 for a 10% Partnership Interest