Tax Problem: Barney and Jones loss for 2008
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The partnership of Barney and Jones realized an ordinary loss of $42,000 in 2008. Both the partnership and the two partners are on a calendar-year basis. The partners materially participate in the partnership's activities and share profits and losses equally. At December 31, 2008, Barney had an adjusted basis of $18,000 for his partnership interest before taking the 2008 loss into consideration. On his individual income tax return for 2008, Barney should deduct:
An ordinary loss of $18,000.
An ordinary loss of $21,000.
An ordinary loss of $18,000 and a capital loss of $3,000.
A capital loss of $21,000
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Solution Summary
In five sentences, the response explains the amount of deduction for Barney and the reasons.
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Losses from a partnership to a partner are limited to the amount of adjusted basis of each partner. The theory actually ...
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