d. Assuming the original facts and that Farell is deemed to be an active participant in Sierra Vista, and he also has a $278,000 loss from a sole proprietorship, determine how much total trade or business loss Farell will deduct on his return in year 1. Loss deductible

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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1

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 $154,000 tax basis in his LLC interest
that includes his $141,000 share of Sierra Vista's general liabilities. By the end of the
year, Farell's share of Sierra Vista's general liabilities have increased to $154,000.
Because of the time he spends in other endeavors, Farell does not materially participate
in Sierra Vista. His share of the Sierra Vista losses for year 1 is $179,000. 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.
Note: Leave no answer blank. Enter zero if applicable.
d. Assuming the original facts and that Farell is deemed to be an active participant in Sierra Vista, and he
also has a $278,000 loss from a sole proprietorship, determine how much total trade or business loss
Farell will deduct on his return in year 1.
Loss deductible
Transcribed Image Text: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 $154,000 tax basis in his LLC interest that includes his $141,000 share of Sierra Vista's general liabilities. By the end of the year, Farell's share of Sierra Vista's general liabilities have increased to $154,000. Because of the time he spends in other endeavors, Farell does not materially participate in Sierra Vista. His share of the Sierra Vista losses for year 1 is $179,000. 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. Note: Leave no answer blank. Enter zero if applicable. d. Assuming the original facts and that Farell is deemed to be an active participant in Sierra Vista, and he also has a $278,000 loss from a sole proprietorship, determine how much total trade or business loss Farell will deduct on his return in year 1. Loss deductible
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