On January 1, X9, Gerald received his 50% profits and capital interest in High Air, LLC in exchange for $3,500 in cash and real property with a $4,500 tax basis secured by a $3,500 nonrecourse mortgage. High Air reported a $16,500 loss for its X9 calendar year. How much loss can Gerald deduct, and how much loss must he suspend if he only applies the tax basis loss limitation?

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