Texts: Review the following scenario carefully. Clarence Hayes is a partner in Flower Drums, Ltd., a company that sells specialty planter boxes. He does not materially participate in the partnership, and he has no passive income. All of his investment is at risk. His gross income is $150,000. His Schedule K-1 (Form 1065) showed a $6,000 loss in box 1 and a decrease in partnership liabilities of $1,000. He contributed $1,000 in March. He also had $1,100 of tax-exempt income reported on his Schedule K-1. Information needed for all four loss limitations has been provided, including his 2021 Federal Partnership K-1 Partner's Outside Basis Worksheet below. How much of Clarence's unallowed outside basis will be carried forward?
CLARENCE HAYES 2021 FEDERAL PARTNERSHIP K-1 PARTNER'S OUTSIDE BASIS WORKSHEET
235-00-9041 Partnership Name: FLOWER DRUMS LTD PART I - PARTNER'S OUTSIDE BASIS
Partnership EIN: 07-2350401
Keep for Your Records
1. Adjusted basis at beginning of year. Not less than zero. Enter -0- for first tax year.
a. Cash contributions... $0
b. Property contributions (adjusted basis less associated liabilities). Not less than zero. $1,000
c. Service contributions at fair market value if taxed. Total contributions... $1,000
2. Increased share of or assumption of partnership liabilities.
a. $1,000
3. Share income or gains including tax-exempt income (Part I, col a line 21 plus 22).
a. $1,100
4. Business interest expense included on Schedule K-1.
a. $1,100
5. Subtract Line 4b from Line 4a. If the result is less than zero, enter zero and carry the amount as positive on Line 12.
a. $0
6. Other basis increases (Part col a line 23).
a. $1,100
Total increases: $2,100
7. Adjusted basis before decreases. Line 1 plus Line 6.
a. $2,100
8. Cash distributions.
a. $6,100
9. Adjusted basis of distributed property.
a. $0
10. Decreased share of partnership liabilities.
a. $1,000
11. Adjusted basis before additional decreases and expenses. Line 7 less Lines 8c and 9. Not less than zero.
a. $1,000
12. Share of the partnership's current year losses and deductions (Part II, col b, line 21).
a. $5,100
13. Remaining business interest expense. Line 4b less Line 4a. Not less than zero.
a. $6,000
14. Prior year suspended losses (Part I, col c line 21 plus 24).
a. $0
15. Losses allowed this year (Lines 11 through 13), but not more than Line 10.
a. $5,100
16. Disallowed losses this year (Line 11 through 13, less Line 13).
a. $0
17. Adjusted basis before nondeductible expenses and other basis adjustments (Line 10 less Line 14). Not less than zero.
a. $900
18. Share of the partnership's current year nondeductible expenses (Part I, col b, line 22).
a. $0
19. Prior year suspended nondeductible expenses (Part II, col c, line 22).
a. $0
20. Nondeductible expenses allowed this year (Line 16 plus Line 17), but not more than Line 15.
a. $0
21. Disallowed nondeductible expenses this year (Line 17 plus Line 18, less Line 19).
a. $0
22. Adjusted basis before other basis adjustments (Line 16 less Line 19). Not less than zero.
a. $900
23. Other current year basis decreases (Part II, col b, line 23).
a. $0
24. Prior year suspended other basis decreases (Part II, col c, line 23).
a. $0
25. Other basis decreases allowed this year (Line 22 plus Line 23), but not more than Line 21.
a. $0
26. Disallowed other basis decreases this year (Line 22 plus Line 23, less Line 24).
a. $0
Total: $900
$900 $5,100 $6,000