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 $156,000 tax basis in his LLC interest that includes his $138,000 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 $156,000. 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 $193,000. As a partner in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $14,000. (Leave no answer blank. Enter zero if applicable.)
a-1. Determine how much of the Sierra Vista loss Farell will currently be able to deduct on his tax return for year 1.
a-2. List the losses suspended due to tax basis, at-risk, and passive activity loss limitations.
Assume Farell’s Riverwoods K-1 indicates passive income of $38,000.
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.
Assume Farell is deemed to be an active participant in Sierra Vista.
c-1. Determine how much of the Sierra Vista loss he will ultimately be able to deduct on his tax return for year 1.
c-2. List the losses suspended due to tax basis, at-risk, and passive activity loss limitations.