What outside basis do Lance and Francesca have in their partnership interests at the end of the year? How much of their losses are currently not deductible by Lance and Francesca because of the tax-basis limitation? To what extent does the passive activity loss limitation apply in restricting their deductible losses for the year?
The TimpRiders LP has operated a motorcycle dealership for a number of years. Lance is the limited partner, Francesca is the general partner, and they share capital and profits equally. Francesca works full time managing the
| Net sales | $ 715,000 |
|---|---|
| Cost of goods sold | 538,000 |
| Operating expenses | 200,000 |
| Short-term capital loss | 7,000 |
| Tax-exempt interest | 7,000 |
| §1231 gain | 11,000 |
On the last day of the year, the partnership distributed $5,300 each to Lance and Francesca.
- What outside basis do Lance and Francesca have in their partnership interests at the end of the year?
- How much of their losses are currently not deductible by Lance and Francesca because of the tax-basis limitation?
- To what extent does the passive activity loss limitation apply in restricting their deductible losses for the year?
(For all the requirements, negative amounts should be entered with a minus sign. Leave no answer blank. Enter zero if applicable.)
| Lance | Francesca | |
| A. Year end basis | ||
| B. Loss limited by tax basis | ||
| C. Loss limited by passive activity |
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