Rachel Sanchez is a limited partner in HN Partnership, which operates a souvenir shop, and a member in James-n-Jellies LLC, which makes specialty food items and sells them at retail. Rachel has no involvement in the partnership business, but she handles all the advertising for the LLC. The LLC compensates her at the rate of $45 per hour, and she billed the LLC for 592 hours of work this year. Rachels only other income-generating activity is her part-time employment as a librarian.

Rachels Schedule K-1 from HN Partnership reported that her share of ordinary business loss was $3,810. Her Schedule K-1 from Jams-n-Jellies LLC reported that her share of ordinary business income was $15,082. How much of her share of the partnership loss can Rachel deduct on her current year Form 1040?

Justify your answer by citing relevant Internal Revenue Code sections, regulations and court cases. There is no set number of citations but you cant go wrong with one of each.

For the explanation, citations from the Internal Revenue Code is what I am looking for.