Question

Preben is a 42% partner in Ferequi LLC, which does not invest in real estate. On January 9, Preben's adjusted basis for his LLC interest is $66,000, and his at-risk amount is $65,000. His share of losses from Ferequi for the current year is $103,000, all of which is passive. Preben owns as another investment that produced $57,000 of passive income during the year. (Assume there were no distributions or changes in liabilities during the year.) How much of Ferequi's losses may Preben deduct on his Form 1040?

How much of the loss is suspended and what Code provisions cause the suspensions?

Applicable Provision Deductible Loss Suspended Loss

§ 704(d) Overall limitation $______ $______

§ 465 At-risk limitation $_______ $______

§ 469 Passive loss limitation $_______ $_______

Therefore, Preben can deduct $________ on his return in the current year.

Answer 1

§ 704(d) Overall limitation $______ $______ Answer : 704 (d 66000 37000) Since the adjusted basis is the amount which belongs to him is only deductible loss the remaining amount of loss is suspended i.e., $37000(103000-66000) and carried forward to next year.

§ 465 At-risk limitation $_______ $______ Answer : 465 65000 38000 ) Since the at risk limitation is the amount he is eligible to take risk for the current year is only deductible loss the remaining amount of loss is suspended i.e., $38000(103000-65000) and carried forward to next year.

§ 469 Passive loss limitation $_______ $_______ Answer : 469 57000 46000 Since the paasive loss can be adjusted against passive income only. The paasive income of $57000 is deductible loss and the remaining amount i.e., $46000(103000-57000) is suspended and carried forward to next year

Therefore, Preben can deduct $________ on his return in the current year. Answer : Preden can deduct $57000 on his return