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Unformatted text preview: Jim can only deduct $10,000 of loss because he is at-risk for only $10,000. $2,000 is suspended under the at-risk limitations. Jim can deduct no future losses until he restores his at risk amount by investing additional capital in the partnership or by increasing partnership debt (or the easiest way to restores his at-risk amount is by turning the business around and reporting profit). In reality, what the rule says is that because he is not liable for the debt that is creating the basis in the equipment; his deduction for the depreciation that the debt is generating is limited. He could walk away from the partnership without any obligation to pay the partnership's nonrecourse debt. The at-risk rule limits how much depreciation Jim can deduct but not other expenses which are paid for or for which he is personally liable....
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- Spring '09