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: [ ]

As per IRC, section 461(l), deals with the excess business loss deduction or limitation. There is a…

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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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