As of January 1 of last year, Dylan’s outside basis and at-risk limitation for his 40% interest in the DEF Partnership were $60,000. Dylan and the partnership use the calendar year for tax purposes. The partnership incurred an operating loss of $200,000 for last year and a profit of $120,000 for the current year. Dylan is a material participant in the partnership.
a. How much loss, if any, may Dylan recognize for last year?
b. How much net reportable income must Dylan recognize for the current year?
Click here for the solution: As of January 1 of last year, Dylan’s outside basis and at-risk limitation for his 40% interest in the DEF Partnership were $60,000
