Virginia Day owns a 5 percent limited partnership interest in Zulu Limited Partners. In Year 4 the partnership incurred a substantial loss. On January 1, Year 5, Virginia sold the partnership interest to an unrelated party for $4,000 cash. Virginia's share of partnership debts were transferred to the buyer. Virginia's only other sources of income in Years 4 and 5 are a salary of $100,000 and rental real estate income of $10,000.

Using the information about Virginia's limited partnership interest, complete the table below. Determine the amount of partnership loss that can be deducted in Year 4 and the amounts suspended in Year 4 due to tax basis, at-risk basis, and passive activity loss limitations. Calculate Virginia's gain or loss from the sale of her partnership interest and the amount of each suspended loss that she can deduct in Year 5. Enter the amounts in the table below using positive values. If the amount is zero, enter a zero (0).

Year 4:

Year 4 loss suspended due to tax basis limitation

Year 4 loss suspended due to at risk basis limitation

Year 4 loss suspended due to passive activity loss limitation

Year 4 limited partnership ordinary loss deduction allowed

Year 5:

Year 5 gain or loss from sale of the limited partnership interest

Year 5 deduction of suspended loss due to tax basis

Year 5 deduction of suspended loss due to at-risk basis

Year 5 deduction of suspended passive activity loss

Year 4 beginning tax basis in the partnership interest	$35,000
Less: share of partnership nonrecourse secured loan from a related party	($2,000)
Year 4 beginning at-risk basis in the partnership interest	$33,000
Share of partnership liabilities (included in tax basis of partnership interest):
Share of partnership qualified nonrecourse secured real estate mortgage	$3,000
Share of partnership nonrecourse secured loan from a related party	$2,000
	$5,000
Year 4 share of partnership ordinary business loss	$50,000

Answer rating: 100% (QA)

Step 1 1 Year 4 loss suspended due to tax basis limitation Ans A loss suspended due to tax basis is a capital loss that cannot be offset due to passiv... View the full answer