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 $259,000 tax basis in his LLC interest that includes his $244,000 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 $259,000. 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 $294,000. As a partner in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $13,000. Farell is single and has no other sources of business income or loss. Note: Leave no answer blank. Enter zero if applicable.
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 $259,000 tax basis in his LLC interest that includes his $244,000 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 $259,000. 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 $294,000. As a partner in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $13,000. Farell is single and has no other sources of business income or loss. Note: Leave no answer blank. Enter zero if applicable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
11
![**Case Overview:**
Farrell is a member of Sierra Vista LLC. Although Sierra Vista is involved in various business ventures, Farrell is not currently active in real estate as an investor or developer. On January 1 of Year 1, Farrell has a $259,000 tax basis in his LLC interest, including $244,000 from Sierra Vista's general liabilities. By the end of the year, Farrell’s share of the general liabilities increases to $259,000. Due to commitments elsewhere, Farrell does not participate materially in Sierra Vista. His share of the Year 1 Sierra Vista losses totals $294,000. Additionally, as a partner in the Riverwoods Partnership, Farrell receives a $13,000 Schedule K-1 passive income. Farrell is single and has no other income sources or losses.
**Note:** Leave no answer blank. Enter zero if applicable.
---
**Required:**
**1. Deduction of Sierra Vista Loss:**
- Determine how much of the Sierra Vista loss Farrell can deduct on his Year 1 tax return.
**2. Suspended Losses:**
- List losses suspended due to tax-basis, at-risk, and passive activity loss limitations.
- Deductible loss: [ ]
- Losses suspended by tax basis limitation: [ ]
- Losses suspended by at-risk limitation: [ ]
- Losses suspended by passive activity loss limitation: [ ]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4c8d4003-6dbe-4a96-8cef-3ca09402ad71%2F3e5e9834-b182-42a5-98d1-2f9099867b55%2Fa3gp39_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Case Overview:**
Farrell is a member of Sierra Vista LLC. Although Sierra Vista is involved in various business ventures, Farrell is not currently active in real estate as an investor or developer. On January 1 of Year 1, Farrell has a $259,000 tax basis in his LLC interest, including $244,000 from Sierra Vista's general liabilities. By the end of the year, Farrell’s share of the general liabilities increases to $259,000. Due to commitments elsewhere, Farrell does not participate materially in Sierra Vista. His share of the Year 1 Sierra Vista losses totals $294,000. Additionally, as a partner in the Riverwoods Partnership, Farrell receives a $13,000 Schedule K-1 passive income. Farrell is single and has no other income sources or losses.
**Note:** Leave no answer blank. Enter zero if applicable.
---
**Required:**
**1. Deduction of Sierra Vista Loss:**
- Determine how much of the Sierra Vista loss Farrell can deduct on his Year 1 tax return.
**2. Suspended Losses:**
- List losses suspended due to tax-basis, at-risk, and passive activity loss limitations.
- Deductible loss: [ ]
- Losses suspended by tax basis limitation: [ ]
- Losses suspended by at-risk limitation: [ ]
- Losses suspended by passive activity loss limitation: [ ]
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