Rosa contributes $50,000 to a business entity in exchange for a 10% ownership interest. Rosa materially participates in the entity. The entity incurs a loss of $900,000 for the current tax year; it holds liabilities of $700,000 at the end of the year. Of this amount, $150,000 is recourse debt and $550,000 is nonrecourse debt. If an amount is zero, enter "0". a. Assume that the business entity is a partnership.
Rosa contributes $50,000 to a business entity in exchange for a 10% ownership interest. Rosa materially participates in the entity. The entity incurs a loss of $900,000 for the current tax year; it holds liabilities of $700,000 at the end of the year. Of this amount, $150,000 is recourse debt and $550,000 is nonrecourse debt. If an amount is zero, enter "0". a. Assume that the business entity is a partnership.
Chapter14: Choice Of Business Entity—operations And Distributions
Section: Chapter Questions
Problem 28P
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Transcribed Image Text:Rosa contributes $50,000 to a business entity in exchange for a 10% ownership interest. Rosa materially participates in the entity. The
entity incurs
loss of $900,000 for the current tax year; it holds liabilities of $700,000 at the end of the year. Of this amount, $150,000 is
recourse debt and $550,000 is nonrecourse debt.
If an amount is zero, enter "0".
a. Assume that the business entity is a partnership.
How much of the entity loss can Rosa deduct on her the current tax year income tax return?
$
50,000 X
What is her basis for the partnership interest at the end of the current tax year?
0 X
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Under the conduit concept, the entity is viewed as merely an extension of the owners. Under the entity concept, the entity is regarded as being
separate and distinct from its owners.
b. Assume that the business entity is a C corporation.
How much of the entity loss can Rosa deduct on her the current tax year income tax return?
$
55,000 X
What is her basis for the stock at the end of the current tax year?
0 X
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