Richard has a 50% interest in a partnership,and he materially participates in the partnership's business.Richard's adjusted basis in the partnership was $60,000 at the beginning of the year,including his share of partnership liabilities.There were no distributions to Richard during the year.During the current year,the partnership borrowed $160,000 from a local bank to purchase equipment needed in the business.All of the partners are personally liable for all partnership debts.The partnership incurred a $320,000 loss this year.What amount can Richard claim as a loss from the partnership on his individual tax return this year?
A)$60,000
B)$80,000
C)$140,000
D)$160,000

Question

Quizplus · Accepted Answer

Richard can claim his share of the partnership loss, which would be $160,000 (50% of the $320,000 loss). Since Richard's adjusted basis was $60,000 and there were no distributions, his basis at the end of the year would be ($60,000 - $160,000) = ($100,000), which is a negative basis. However, since Richard materially participates in the partnership, he can deduct the entire loss against his other income. Therefore, Richard can claim a loss of $140,000 on his individual tax return this year.

Richard Has a 50% Interest in a Partnership,and He Materially