Juan Diego began the year with a tax basis in his partnership interest of $40,000. During the year, he was allocated $25,000 of partnership ordinary business income, $80,000 of 1231 losses, and $120,000 of short-term capital losses and received a cash distribution of $40,000. (Do not round intermediate calculations.)

a. What items related to these allocations does Juan Diego actually report on his tax return for the year? [Hint: See Reg. 1.704-1(d)(2) and Rev. Rul. 66-94.]

b. If any deductions or losses are limited, what are the carryover amounts and what is their character? [Hint: See Reg. 1.704-1(d).]