Problem
Tom is a 10% limited partner in Bucs, L.P., a limited partnership. His beginning tax basis in his partnership interest is $50,000 consisting of his $20,000 investment in partnership capital and his $30,000 share of the partnership's nonqualified nonrecourse debt. For X1, Tom's distributive share of the partnership taxable loss was ($65,000). In X2, Tom's share of partnership income is $28,000.
i. What are the tax consequences to Tom in X1 with respect to the loss?
ii. What are the tax consequences to Tom in X2 with respect to his share of income?
For both years, consider his tax basis in his partnership interest, at-risk basis, carryovers, and how much income (loss) will be reflected in each year's individual tax return.