at_risk_and_passive_loss_limits_solution

at_risk_and_passive_loss_limits_solution - Topic...

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Topic: Interaction of the at-risk limitation & the passive loss limitations [Solution] Mr. Able and Telax Corporation are the two equal members in Abrax LLC. At the beginning of 2009, Abrax had the following balance sheet. January 1, 2009 Assets 200,000 Accounts payable 170,000 Nonrecourse mortgage 20,000 Capital: Mr. Able 5,000 Capital: Telax Inc. 5,000 Liabilities & equity 200,000 Both Mr. Able and Telax Corporation had $100,000 outside basis in their LLC interests. The outside basis included each member’s $95,000 share of Abrax’s liabilities. Abrax’s accounts payable are nonrecourse because no member bears the economic loss for any LLC liability. Abrax’s nonrecourse mortgage, which is secured by real property and held by a state bank, is “qualified nonrecourse financing”. Abrax’s operating loss for 2009 was $42,000, which was allocated equally between the two members in accordance with their economic arrangement. As a result, the two members had a deficit balance in their capital accounts at year-end. December 31, 2009 Assets 175,000 Accounts payable 189,000 Nonrecourse mortgage 18,000 Capital: Mr. Able (16,000) Capital: Telax Inc. (16,000) Liabilities & equity 175,000 Both Mr. Able and Telex received a Schedule K-1 reporting their $21,000 distributive share of the ordinary business loss. Each member had sufficient outside basis to
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at_risk_and_passive_loss_limits_solution - Topic...

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