Question

Rosa contributes $50,000 to FlipCo in exchange for a 10% ownership interest. Rosa materially participates in FlipCo's business.
FlipCo incurs a loss of $900,000 for 2014. Entity liabilities at the end of 2014 are $700,000. Of this amount, $150,000 is for recourse debt, and $550,000 is for nonrecourse debt.
a. Assume that FlipCo is a partnership. How much of Rosa's share of the loss can she deduct on her 2014 individual tax return? What is Rosa's basis for her partnership interest at the end of 2014?
b. Assume that FlipCo is a C corporation. How much of Rosa's share of the loss can she deduct on her 2014 individual tax return? What is Rosa's basis for her stock at the end of 2014?


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  • CreatedMay 25, 2015
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