At the beginning of 2017, Ms. P purchased a 20 percent interest in PPY Partnership for $20,000.

Question:

At the beginning of 2017, 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, 2018, 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 2017 return?

b. Compute Ms. P's recognized gain on sale of her PPY interest.

c. How would your answers to parts a and b change if PPY were an S corporation instead of a partnership?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...