Question

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 $_____________

Answer 1

Answer:

Answer is given below.

Explanation:

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