Exam 11: Investor Losses

In 2018, Joanne invested $90,000 for a 20% interest in a limited liability company LLC) in which she is a material participant. The LLC reported losses of $340,000 in 2018 and $180,000 in 2019. Joanne's share of the LLC's losses was $68,000 in 2018 and $36,000 in 2019. How much of these losses can Joanne deduct?

Vic's at-risk amount in a passive activity is $200,000 at the beginning of the current year. His current loss from the activity is $80,000. Vic had no passive activity income during the year. At the end of the current year:

In 2018, Liam invested $100,000 for a 25% interest in a partnership involved in an activity in which he is a material participant. The partnership reported losses of $340,000 in 2018 and $180,000 in 2019 with Liam's share being $85,000 in 2018 and $45,000 in 2019. How much of the losses can Liam deduct?

A taxpayer is considered to be a material participant if he or she spends more than 500 hours in the activity.

During the current year, Ethan performs personal services as follows: 800 hours in his information technology consulting practice, 625 hours in a real estate development business, and 510 hours in a condominium leasing operation. He expects that losses will be realized from the two real estate ventures while his consulting practice will show a profit. Ethan files a joint return with his spouse whose salary is $125,000. The income and losses from the following ventures is considered active and not subject to the passive activity loss limitations:

All of a taxpayer's tax credits relating to a passive activity can be utilized when the activity is sold at a loss.

In the current year, Crow Corporation, a closely held C corporation that is not a personal service corporation, has $100,000 of passive activity losses, $80,000 of active business income, and $20,000 of portfolio income. How much of the passive activity loss may Crow deduct in the current year?

Linda owns investments that produce portfolio income and Activity A that produces losses. From a tax perspective, Linda will be better off if Activity A is not passive.

Josh has investments in two passive activities. Activity A acquired three years ago) produces income of $30,000 this year, while Activity B acquired two years ago) produces a loss of $50,000. What is the amount of Josh's suspended loss for the year?

Ken has a $40,000 loss from an investment in a partnership in which he does not materially participate. He paid $30,000 for his interest. How much of the loss is disallowed by the at-risk rules? How much is disallowed by the passive activity loss rules?