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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 $100,000 tax basis in
his LLC interest that includes his $90,000 share of Sierra Vista’s
general debt obligations. By the end of the year, Farell’s share of
Sierra Vista’s general debt obligations has increased to $100,000.
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 $120,000. As a partner in the Riverwoods
Partnership, he also has year 1, Schedule K-1 passive income of
$5,000. Farell is single and has no other sources of business
income or loss. (Leave no answer blank. Enter zero if
applicable.)
Assuming Farell is deemed to be an active participant in Sierra Vista and he has a $260,000 loss from a sole proprietorship, determine how much total trade or business loss Farell will deduct on his return in year 1.
note that 95000 is not the right answer
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