George is a limited partner in the GLH Partnership.His basis is $40,000 before considering the current year operations,and includes a $20,000 recourse debt share and a $10,000 nonrecourse debt share.The nonrecourse debt is not treated as qualified nonrecourse financing.GLH reported a $200,000 loss for the year,of which George's 40% share is $80,000.George has passive income of $50,000 from another activity (not eligible for the special real estate deduction).How much of the $80,000 loss can George deduct this year?

Question

Quizplus · Accepted Answer

George can deduct up to his basis in the partnership, which is $40,000. However, he can only use the loss to offset passive income, which is $50,000. Therefore, he can deduct $30,000 of the loss this year, as it is limited by his basis minus the nonrecourse debt not treated as qualified nonrecourse financing.

George Is a Limited Partner in the GLH Partnership