At the beginning of 2015, Ms. P purchased a 20 percent interest in PPY Partnership for $20,000. Ms. P’s Schedule K-1 reported that her share of PPY’s debt at year-end was $12,000 and her share of ordinary loss was $28,000. On January 1, 2016, Ms. P sold her interest to another partner for $2,000 cash.
a. How much of her share of PPY’s loss can Ms. P deduct on her 2015 return?
b. Compute Ms. P’s recognized gain on sale of her PPY interest.