In 2018, Ethan contributes cash of $50,000 and property with a fair market value of $100,000 and basis of $20,000 in exchange for a 20% interest in the EFP Partnership. The partnership is not a passive activity. For 2018, his share of partnership items were an ordinary loss of $80,000, interest income of $2,000, dividends of $5,000, and capital gains of $4,000. How much of the current year loss is deductible by Ethan and what is Ethan's at-risk amount on December 31, 2018?
What will be an ideal response?
Ethan's deductible loss and December 31, 2018, at-risk amount for the partnership are calculated as follows:
| Ethan's Initial At-Risk | $70,000 |
| Interest | $2,000 |
| Dividends | $5,000 |
| Capital Gain | $4,000 |
| At-Risk Prior to Loss | $81,000 |
| Loss Allowed under At-Risk rules | $(80,000) |
| Ending At-Risk | $1,000 |
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