Question

Timothy Gates and Prada Singh decide to form a new company, TGPS LLC (a multimember LLC that will report its operations as a partnership). Timothy is married, and Prada is single. Each contributes $400,000 of capital to begin the business, and both materially participate in the business. In 2019, TGPS reports a net loss of $580,000. What are the implications of this loss for Timothy and Prada?

If an amount is zero, enter "0".

Timothy has an excess business loss of $. He may use $ of his share of the $580,000 LLC business loss to offset nonbusiness income .

Prada has an excess business loss of $. She may use $ of her share of the $580,000 LLC business loss to offset nonbusiness income .

Any excess business loss is treated as part of the taxpayer's NOL carryforward .

Answer 1

As per new limit for business losses, taking any loss more than $250,000 for single and $500,000 for married filing jointly, is considered excess and that excess loss cannot be taken as loss in the tax return for the year.

Timothy is married and will be filing jointly, and has a business loss for the year of $290,000. Since, it is less than $500,000, he can take the full $290,000 of loss on his tax return this year.

Timothy has an excess business loss of $0. He may use $290,000 of his share of the $580,000 LLC business loss to offset nonbusiness income.

Prada is a single taxpayer, and has a business loss for the year of $290,000. This amount is greater than $250,000 limit, so she can take only $250,000 of loss in her this year's tax return, leaving $40,000 of excess business loss.

Prada has an excess business loss of $40,000. She may use $250,000 of her share of the $580,000 LLC business loss to offset nonbusiness income.