Joe invested $8,000 in the XYZ Limited Partnership and received a 10 percent interest in the partnership. The partnership had $26,000 of qualified nonrecourse debt and $26,000 of debt Joe is not responsible to repay because she is a limited partner. Joe is allocated a 10 percent share of both types of debt, resulting in a tax basis of $13,200 and an at-risk amount of $10,600. During the year, XYZ LP generated a ($132,000) loss. How much of Joe's loss is disallowed due to his tax basis or at-risk amount?

Multiple Choice

• $0; all of his loss is allowed to be deducted.

• $2,600 disallowed because of his at-risk amount.

• $5,200 disallowed because of his tax basis.

• $5,200 disallowed because of his at-risk amount.

• $2,600 disallowed because of his tax basis.