9 64 chapter 09 forming and operating partnerships a

This preview shows page 64 - 70 out of 86 pages.

We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
The document you are viewing contains questions related to this textbook.
Chapter 4 / Exercise 34
South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
Raabe/Young/Nellen/Hoffman
Expert Verified
9-64
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
The document you are viewing contains questions related to this textbook.
Chapter 4 / Exercise 34
South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
Raabe/Young/Nellen/Hoffman
Expert Verified
Chapter 09 - Forming and Operating Partnerships a. The members (either Steve or Suki) may deduct $10,000 in losses currently, and they will have a $40,000 loss suspended by the tax basis limitation, and a $150,000 loss suspended by the at-risk limitation as illustrated in the table below: 9-65 Description Tax Basis Limitation At-risk Limitation Explanation (1) Beginning Tax basis and At-risk amount $170,000 $20,000 General debt obligations of LLCs are treated as nonrecourse debt. Thus, Suki or Steve’s beginning at-risk amount is $150,000 less than their beginning tax basis. (2) Distribution ($10,000) ($10,000) (3) Tax basis and At-risk amount before ordinary business loss $160,000 $10,000 (1) + (2) (4) Ordinary business loss ($200,000) $400,000 x50% (5) Loss clearing the Tax basis hurdle ($160,000) Loss limited to $160,000 tax basis (6)Loss suspended by Tax basis hurdle ($40,000) (4) - (5) (7) Loss clearing Tax basis hurdle ($160,000) (5) (8) Loss clearing At-risk hurdle and currently deductible ($10,000) Loss limited to $10,000 at-risk amount on line (3). This amount is currently deductible because Steve and Suki are active participants in the activity. (9) Loss suspended by At- risk hurdle ($150,000) (7) - (8)
Chapter 09 - Forming and Operating Partnerships 9-66
Chapter 09 - Forming and Operating Partnerships b. Under these facts, Steve may deduct $120,000 in losses currently (a $110,000 increase over the loss he could deduct in part a.), and will have a $80,000 loss suspended by the at-risk limitation as illustrated in the table below: 9-67 Description Tax Basis Limitation At-risk Limitation Explanation (1) Beginning Tax basis and At-risk amount $170,000 $20,000 General debt obligations of LLCs are treated as nonrecourse debt. Thus, Steve’s beginning at-risk amount is $150,000 less than his beginning tax basis. (2) Increase in debt allocation $50,000 $100,000 [(100,000 + 50% x $200,000) - $150,000] for tax basis and [100,000 – 0] for at-risk amount because guaranteeing the debt makes it recourse debt (3) Tax basis and At-risk amount before ordinary business loss $220,000 $120,000 (1) + (2) (4) Ordinary business loss ($200,000) (5) Loss clearing the Tax basis hurdle ($200,000) Loss is less than tax basis limitation (6)Loss suspended by Tax basis hurdle $0 (4) - (5) (7) Loss clearing Tax basis hurdle ($200,000) (5) (8) Loss clearing At-risk hurdle and currently deductible ($120,000) Loss is limited to at-risk amount on line (3). This amount is currently deductible because Steve is an active participant in the activity. (9) Loss suspended by At- risk hurdle ($80,000) (7) - (8)
Chapter 09 - Forming and Operating Partnerships 9-68
Chapter 09 - Forming and Operating Partnerships Suki may deduct $10,000 in losses currently (the same amount of loss as in part a.), and she will have a $90,000 loss suspended by the tax basis limitation and a $100,000 loss suspended by the at-risk limitation as illustrated in the table below: 9-69 Description Tax Basis Limitation At-risk Limitation Explanation (1) Beginning Tax basis and At-risk amount $170,000 $20,000 General debt obligations of LLCs are treated as nonrecourse debt. Thus, Suki’s beginning at-risk amount is $150,000 less than her beginning tax basis.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture