Answer: The loss carried to the next year is $10,000
Explanation:
the initial investment = $10,000 contribution + $40,000 recourse note= $50,000 initial basis.
The income in the first year = $15,000
Therefore total sum basis = $50,000 initial investment + $15,000 income = $65,000
The cash distributed = $5,000
we deduct the cash distributed from the total sum basis
hence,
remaining basis = $65,000 - $5,000 = $60,000
since the loss = $70,000
therefore,
the remaining loss after the first year = $70,000 - $60,000 = $10,000
so $10,000 will be the unused loss carried to the next year.
