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 $183,000 tax basis in his LLC interest that includes his $172,000 share of Sierra Vistas general debt obligations. By the end of the year, Farells share of Sierra Vistas general debt obligations has increased to $183,000. 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 $212,000. As a partner in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $7,000. Farell is single and has no other sources of business income or loss.

1. a-1. Determine how much of the Sierra Vista loss Farell will currently be able to deduct on his tax return for year 1.

2. a-2. List the losses suspended due to tax-basis, at-risk, and passive activity loss limitations.

A1- deductable loss:

A2- losses suspended due to tax-basis:

At-risk:

and passive activity loss limitations:

Assume Farells Riverwoods K-1 indicates passive income of $25,000.

1. b-1. Determine how much of the Sierra Vista loss he will ultimately be able to deduct on his tax return for year 1.

2. b-2. List the losses suspended due to tax-basis, at-risk, and passive activity loss limitation.

A1- deductable loss:

A2- losses suspended due to tax-basis:

At-risk:

and passive activity loss limitations:

Assume Farell is deemed to be an active participant in Sierra Vista.

1. c-1. Determine how much of the Sierra Vista loss he will ultimately be able to deduct on his tax return for year 1.

2. c-2. List the losses suspended due to tax-basis, at-risk, and passive activity loss limitations.

A1- deductable loss:

A2- losses suspended due to tax-basis:

At-risk:

and passive activity loss limitations: