SelfStudy Problem 107 During the current tax year Joe is a p

Self-Study Problem 10.7 During the current tax year, Joe is a partner in a plumbing business. His amount at-risk at the beginning of the year is $45,000. During the year, Joe\'s share of loss is $60,000. 1. What is the amount of the loss that Joe may deduct for the current tax year? 2. If Joe has a profit of $31,000 in the following tax year, how much is taxable?

Solution

1.the amount of the loss that joe may deduct for the current year is to the extent of risk at beginning $45,000.

2.next year balance loss =$15000($60,000-$45,000) is carry forwarded .and amount taxable is

next year profit - carry forwarded loss=$31,000-$15,000=$16000