Passive Loss Limitation: Kate, Chad and Stan are partners in the KCS Partnership
ID: 2425746 • Letter: P
Question
Passive Loss Limitation: Kate, Chad and Stan are partners in the KCS Partnership, which operates a manufacturing business. The partners formed the partnership ten years ago with Kate and Chade each as a general partner having a 40% capital and profits interest. Kate materially participates; Chad does not. Stan has 20% interest as a limited partner. At the end of the current year, the following information was available:
A) How much operating loss can each partner deduct in the current year?
B) Assuming each partner's individual AGI is less than 100,000, how much loss could each partner deduct if the KCS Partnersip were engaged in rental activities? Assume Kate and Chad both actively particpate but Stan does not.
Kate Chad Stan Basis in partnership(before gains and losses) 100,000 100,000 50,000 Nonrecourse liability (already included in basis and not qualified real estate financing) 50,000 50,000 25,000 Operating Loss (80,000) (80,000) (40,000) Capital Gain 20,000 20,000 10,000Explanation / Answer
A kate chad stan
profit available for deducting losses 100000 100000 50000
less :non recourse liability 50000 50000 25000
amout avalable for deducting losses 50000 50000 25000
operating loss maximum deducted 50000 50000 25000
capital gain is not used for deducting operating loss