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The MOP Partnership is involved in construction activities. Patricia has an adjusted basis for her partnership interest on January 1 of the current...

The MOP Partnership is involved in construction activities. Patricia has an adjusted basis for her partnership interest on January 1 of the current year of $600,000, consisting of the following.

Capital account

$350,000

Share of partnership recourse debt

50,000

Share of partnership nonrecourse debt

 200,000

 

$600,000

During the year, the partnership has an operating loss of $1.2 million and distributes $60,000 of cash to Patricia. Partnership liabilities were the same at the end of the tax year, and the nonrecourse debt is not "qualified nonrecourse debt." If she owns a 60% share of partnership profits, capital, and losses, and is an active ("material") participant in the partnership.


a) How much of her share of the operating loss can Patricia deduct?


b) What Code provisions could cause a suspension of the loss?


c) How would your answer change if MOP were an LLC and Patricia had not personally guaranteed any of the debt?

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