Tobias is a 50% partner in Solomon LLC, which does not invest in real estate. On January 1, 2016, Tobias’s adjusted basis for his LLC interest is $130,000, and his at-risk amount is $105,000. His share of losses from Solomon for 2016 is $150,000, all of which is passive. He has another investment that produced $90,000 of passive income during 2016. (Assume there were no distributions or changes in liabilities during the year.)

How much of Solomon’s losses may Tobias deduct in 2016 on his Form 1040? How much of the loss is suspended and what Code provisions cause the suspensions?

Applicable Provision Deductible Loss Suspended Loss
§ 704(d) Overall limitation $130,000 $_______
§ 465 At-risk limitation $105,000 $_
§ 469 Passive loss limitation $90,000 $_______

Tobias's basis limitation restricts his deductible loss to $ 130,000. The at-risk rules then limits his deductible loss to $ 105,000. His passive activity loss rules reduce his deductible loss to 0+90,000=$ 90,000

Suspension of loss:

1. 704(d) Overall limitation- Deductible loss $130,000 Suspended Loss $ 20,000 (150,000-130,000)

2. 465 At-risk limitation - Deductible loss $ $105,000 Suspended Loss $25,000 (150,000-20,000-105,000)

3. 469 Passive Loss limitation - Deductible Loss $ 90,000 Suspended loss $ 105,000