Reference no: EM132996083
Jon has a 50% interest in BJL Partnership and he materially participates in the business. His adjusted basis in BJL at the beginning of the current tax year was $25,000 and there were no distributions to Jon during the year.
During the year, the partnership borrowed $65,000 from the local bank for the following reasons:
- Purchased equipment for the business $55,000
- Paid off other BJL liabilities in full $10,000 BJL incurred a $120,000 loss for the current tax year.
Problem 1: How much (if any) of the BJL loss can Jon deduct on his personal tax return?
Problem 2: How much (if any) of the BJL loss must Jon carry forward until his basis is reestablished?
Problem 3: What is Jon's adjusted basis in BJL, including his share of the loss?
a) $50,000; $50,000; $10,000
b) $57,500; $ 2,500; $ 0
c) $60,000; $ 0; $ 0
d) $52,500; $ 7,500; $ 0