You make the callBy: National Association of Tax Professionals
June 5, 2025

Question: On Jan. 1, Edna and Stacy each contributed $100 in cash to a new limited liability company (LLC) taxed as a partnership, Counting Cowgirls. Each partner has a 50% interest in the LLC. The LLC immediately obtained an $800 loan to purchase a laser printer, qualifying for $320 of bonus depreciation (40% of $800). This creates a business loss of $320 for the year. Can Edna and Stacy deduct this loss against their outside basis, or is the loss suspended?

Answer: Yes, Edna and Stacy can each deduct their share of the $320 loss. Deductibility hinges on outside basis, which is sufficient due to the liability allocation.

Each partner contributed $100. The $800 partnership loan increased each partner’s outside basis by their $400 share of liabilities, bringing their outside basis to $500 each ($100 + $400). Outside basis includes a partner’s share of liabilities and cannot go negative. Losses are only deductible to the extent of a partner’s outside basis.

The $320 bonus depreciation is allocated equally, resulting in a $160 loss per partner. Outside basis, remains positive at $340 ($500 - $160), so the entire loss is currently deductible.

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penAbout National Association of Tax Professionals

The National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.

The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.

Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.

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