Determine how much of the Sierra Vista loss Farell

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Problem - 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 $201,000 tax basis in his LLC interest that includes his $188,000 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 $201,000. Because of the time he spends in other endeavors, Forell does not materially participate in Sierra Vista. His share of the Sierra Vista losses for year 1 is $226.000. As a partner in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $10.000. Farell is single and has no other sources of business income or loss. (Leave no answer blank. Enter zero if applicable.)

Required -

1. Determine how much of the Sierra Vista loss Farell will currently be able to deduct on his tax return for year 1.

2. List the losses suspended due to tax-basis, at-risk, and passive activity loss limitations.

Reference no: EM132462845

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