bbrownatl Posted February 5, 2012 Report Share Posted February 5, 2012 Any insight appreciated here. I have a client that had a limited partnership interest of 70% and from 2004-2006 incurred passive losses of ($91K). At the beginning of 2007, he bought out the other partner. For 2007, the business had income of $51K but ended up shutting down the business at the end of the year with still being on the hook personally for $84K in accounts payable. On his 2007 return, I took the full loss of $91K offset by the income of $51K for a net loss of $40K. In getting audited this year, the gov't contends that he can't take the $40K loss as he only basis of $51K. Before replying, I'd appreciate any insight here. I'm thinking that his basis would be increased by the $84K that he is on the hook for and thus would be able to take the $40K loss. Again, any insight appreciated here. Not sure if I'm missing the boat on this basis issue. Much thanks. Quote Link to comment Share on other sites More sharing options...
jainen Posted February 5, 2012 Report Share Posted February 5, 2012 >>$84K that he is on the hook for<< Weren't these expenses already distributed to the partners at the time they were incurred, part of his 91K accumulated losses? How much did he pay to buy out his partner? Can he increase basis by simply agreeing to pay debts he was NOT otherwise liable for? Was the $51K passive income on a Schedule C? What does the 1065 for 2007 say? Quote Link to comment Share on other sites More sharing options...
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