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 $84,000 tax basis in his LLC interest that includes his $72,000 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 $84,000. 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 $115,000. As a partner in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $9,000. 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 $84,000 tax basis in his LLC interest that includes his $72,000 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 $84,000. 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 $115,000. As a partner in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $9,000. 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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![[The following information applies to the questions displayed below.]
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 $84,000 tax basis in his LLC interest that includes his $72,000 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
$84,000. 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 $115,000. As a partner in the Riverwoods Partnership,
he also has year 1, Schedule K-1 passive income of $9,000. Farell is single and has no other sources of
business income or loss.
Note: Leave no answer blank. Enter zero if applicable.
Required:
a-1. Determine how much of the Sierra Vista loss Farell will currently be able to deduct on his tax return for year 1.
a-2. List the losses suspended due to tax-basis, at-risk, and passive activity loss limitations.
a-1. Deductible loss
a-2. Losses suspended by tax basis limitation
a-2. Losses suspended by at-risk limitation
a-2. Losses suspended by passive activity loss limitation
$
$
$
$
12.000
0
84,000
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4372ec4d-b133-43db-9782-a231351f841b%2F52061a15-d87c-4b35-a1b6-4fb6227a10ed%2Fn4fqy9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:[The following information applies to the questions displayed below.]
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 $84,000 tax basis in his LLC interest that includes his $72,000 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
$84,000. 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 $115,000. As a partner in the Riverwoods Partnership,
he also has year 1, Schedule K-1 passive income of $9,000. Farell is single and has no other sources of
business income or loss.
Note: Leave no answer blank. Enter zero if applicable.
Required:
a-1. Determine how much of the Sierra Vista loss Farell will currently be able to deduct on his tax return for year 1.
a-2. List the losses suspended due to tax-basis, at-risk, and passive activity loss limitations.
a-1. Deductible loss
a-2. Losses suspended by tax basis limitation
a-2. Losses suspended by at-risk limitation
a-2. Losses suspended by passive activity loss limitation
$
$
$
$
12.000
0
84,000
0
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