Farell is a member of Sierra Vista LLC. Although Sierra Vista is involved in a number of different business ventures, it is not currently involved in real estate either as an investor or as a developer. On January 1, year 1, Farell has a $152,000 tax basis in his LLC interest that includes his $135,000 share of Sierra Vista's general liabilities. By the end of the year, Farell's share of Sierra Vista's general liabilities have increased to $152,000. Because of the time he spends in other endeavors, Farell does not materially participate in Sierra Vista. His share of the Sierra Vista losses for year 1 is $189,000. As a partner in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $14,000. Farell is single and has no other sources of business income or loss. Note: Leave no answer blank. Enter zero if applicable. Problem 20-76 Part b (Algo) Assume Farell's Riverwoods K-1 indicates passive income of $27,000. Required: b-1. Determine how much of the Sierra Vista loss he will ultimately be able to deduct on his tax return for year 1. b-2. List the losses suspended due to tax-basis, at-risk, and passive activity loss limitations. b-1. Deductible loss b-2. Losses suspended by tax basis limitation b-2.Losses suspended by at-risk limitation b-2.Losses suspended by passive activity loss limitation
Farell is a member of Sierra Vista LLC. Although Sierra Vista is involved in a number of different business ventures, it is not currently involved in real estate either as an investor or as a developer. On January 1, year 1, Farell has a $152,000 tax basis in his LLC interest that includes his $135,000 share of Sierra Vista's general liabilities. By the end of the year, Farell's share of Sierra Vista's general liabilities have increased to $152,000. Because of the time he spends in other endeavors, Farell does not materially participate in Sierra Vista. His share of the Sierra Vista losses for year 1 is $189,000. As a partner in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $14,000. Farell is single and has no other sources of business income or loss. Note: Leave no answer blank. Enter zero if applicable. Problem 20-76 Part b (Algo) Assume Farell's Riverwoods K-1 indicates passive income of $27,000. Required: b-1. Determine how much of the Sierra Vista loss he will ultimately be able to deduct on his tax return for year 1. b-2. List the losses suspended due to tax-basis, at-risk, and passive activity loss limitations. b-1. Deductible loss b-2. Losses suspended by tax basis limitation b-2.Losses suspended by at-risk limitation b-2.Losses suspended by passive activity loss limitation
Chapter15: Taxing Business Income
Section: Chapter Questions
Problem 14CE
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Question
Transcribed Image Text:Farell is a member of Sierra Vista LLC. Although Sierra Vista is involved in a number of different business ventures, it is not
currently involved in real estate either as an investor or as a developer. On January 1, year 1, Farell has a $152,000 tax
basis in his LLC interest that includes his $135,000 share of Sierra Vista's general liabilities. By the end of the year, Farell's
share of Sierra Vista's general liabilities have increased to $152,000. Because of the time he spends in other endeavors,
Farell does not materially participate in Sierra Vista. His share of the Sierra Vista losses for year 1 is $189,000. As a partner
in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $14,000. Farell is single and has no
other sources of business income or loss.
Note: Leave no answer blank. Enter zero if applicable.
Problem 20-76 Part b (Algo)
Assume Farell's Riverwoods K-1 indicates passive income of $27,000.
Required:
b-1. Determine how much of the Sierra Vista loss he will ultimately be able to deduct on his tax return for year 1.
b-2. List the losses suspended due to tax-basis, at-risk, and passive activity loss limitations.
b-1. Deductible loss
b-2. Losses suspended by tax basis limitation
b-2.Losses suspended by at-risk limitation
b-2.Losses suspended by passive activity loss limitation
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