Jay has a tax basis of $14,000 in his partnership interest at the beginning of the partnership tax year. The following amounts of partnership debt were allocated to Jay and are included in his beginning of the year tax basis: (1) recourse debt - $3,000, (2) qualified nonrecourse debt - $1,000, and (3) nonrecourse debt - $500. If Jay is allocated a $15,000 loss for the current year, how much of the loss will be suspended under the tax basis and at-risk limitations?

a. $500, $1,000
b. $1,000, $500
c. $0, $0
d. $14,000, $1,000

B

Explanation:

DetailsAmt $

Jay's Tax basis in the partnership= 14,000

Loss Allocated to Jay in the current Year 15,000

So Loss suspensed due to Tax basis limitation= 1,000

Non recourse debt of Jay 500

So At risk amount =$14000-$500= 13,500

Remaining loss not suspended= 14,000

So out of $14000 loss not suspended , an amount

of $500 will be further suspended for at risk

limitation.

So Jay could deduct only $13500 loss after this.

So correct option is b . $1000, $500

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