Dan, who is active in the management of the partnership, contributes $10,000 in cash to the newly

Question:

Dan, who is active in the management of the partnership, contributes $10,000 in cash to the newly formed DEF Partnership for a 10% interest in the partnership. The partners transfer no liabilities to the partnership. During the partnership’s first year, DEF borrows $75,000 from a bank and is liable for accounts payable amounting to $180,000 at the end of the current year. The DEF Partnership incurs a $400,000 ordinary loss during the current year.
a. How much of the ordinary loss may Dan deduct on his individual tax return?
b. What is Dan’s basis in his partnership interest at the end of the current year?
c. How much of the loss (if any) carries over to future years?

Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... 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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