Kate, Chad, and Stan are partners in the KCS Partnership, which operates a manufacturing business. The partners formed the partnership ten years ago with Kate and Chad each as general partners having a 40% capital and profits interest. Kate materially participates; Chad does not. Stan has a 20% interest as a limited partner. At the end of the current year, the following information was available:

a. How much operating loss can each partner deduct in the current year?
b. Assuming each partner€™s individual AGI is less than $100,000, how much loss could each partner deduct if the KCS Partnership were engaged in rental activities? Assume Kate and Chad both actively participate, but Stan does not.

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Kate Chad Stan Basis in partnership (before gains and losses) S100,000 $100,000 50,000 Distributive share of: Nonrecourse liability (already included in basis and not qualified real estate financing)50,000 50,000 25,000 Operating loss (80,000) (80,000) 40,000) Capital gain 20,000 20,000 10,000