Rosa contributes $50,000 to FlipCo in exchange for a 10% ownership interest. Rosa materially participates in FlipCo's

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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?
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...
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Related Book For  answer-question

South Western Federal Taxation 2015 Essentials Of Taxation Individuals And Business Entities

ISBN: 9781285438290

18th Edition

Authors: James Smith, William Raabe, David Maloney, James Young

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