McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 62

{Research} Jenkins has a one-third capital and profits interest in the Maverick General Partnership.On January 1, year 1, Maverick has $120,000 of general debt obligations and Jenkins has a $50,000 tax basis (including his share of Maverick's debt) in his partnership interest.During the year, Maverick incurred a $30,000 nonrecourse debt that is not secured by real estate.Because Maverick is a rental real estate partnership, Jenkins is deemed to be a passive participant in Maverick.His share of the Maverick losses for year 1 is $75,000.Jenkins is not involved in any other passive activities and this is the first year he has been allocated losses from Maverick.a.Determine how much of the Maverick loss Jenkins will currently be able to deduct on his tax return for year 1, and list the losses suspended due to tax basis, at-risk, and passive activity loss limitations.b.If Jenkins sells his interest on January 1, year 2, what happens to his suspended losses from year 1? { Hint : See Sennett v.Commissioner 80 TC 825 (1983) and Prop.Reg.§1.65-66(a).