Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of debt she is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of the debt resulting in a tax basis of $7,000 and an at-risk amount of $5,000. During the year, ABC LP generated a ($70,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount

$2,000

Explanation:

Calculation for How much of the Sue's loss is disallowed due to her tax basis or at-risk amount

Based on the information given we were told that that Sue is been allocated a 10% of the debt which resulted in a tax basis of the amount of $7,000 as well as an at-risk amount of $5,000 which means that the amount that the Sue's loss will be disallowed due to her tax basis Amount or at-risk amount will be calculated as :

Using this formula

Disallowed Sue's loss=Tax basis-At-risk amount

Let plug in the formula

Disallowed Sue's loss=$7,000-$5,000

Disallowed Sue's loss=$2,000

Therefore How much of the Sue's loss is disallowed due to her tax basis or at-risk amount will be $2,000

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