Annabell and Eva own and manage Purity Forms Development. Annabells and Evas bases in Purity at the
Question:
Annabell and Eva own and manage Purity Forms Development. Annabell’s and Eva’s bases in Purity at the beginning of the year are $18,000 and $24,000, respectively. During the current year, Purity suffers a $90,000 net operating loss. Purity’s only debt is a $45,000 nonrecourse debt on its office building (incurred during the current year). Determine the deductibility of the net operating loss under each of the following assumptions:
a. Purity is a partnership. Annabell owns a 1/3 interest, and Eva owns a 2/3 interest in the partnership.
b. Purity is a corporation. Annabell owns 1/3 of the stock, and Eva owns 2/3 of the Purity stock.
c. Purity is an S corporation. Annabell owns 1/3 of the stock, and Eva owns 2/3 of the Purity stock.
Step by Step Answer:
a AnnaBells share of the partnership loss is 30000 90000 x 13 and Evas share of the loss is 60000 90000 x 23 The capital recovery concept limits the amount of any deduction to the amount invested This ...View the full answer
Concepts In Federal Taxation
ISBN: 9780324379556
19th Edition
Authors: Kevin E. Murphy, Mark Higgins, Tonya K. Flesher
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