Question

Ray and Chuck own 50 percent capital and profits interests in Alpine Properties LLC. Alpine builds and manages rental real estate, and Ray and Chuck each workspercent capital and profits interests in Alpine Properties LLC. Alpine builds and manages rental real estate, and Ray and Chuck each works full time (over full time (over 1,000 hours per year) managing Alpine. Alpineâs debt (at both the beginning and end of the year) consists of $1,570,000 in nonrecourse mortgages obtained from an unrelated bank and secured by various rental properties. At the beginning of the current year, Ray and Chuck each had a tax basis of $250,000 in his respective LLC interest, including his share of the nonrecourse mortgage debt. Alpineâs ordinary business losses for the current year totaled $532,000, and neither member is involved in other activities that generate passive income. Assume CARES Act applies.
Required:
If both Ray and Chuck are single and Ray has a current-year loss of $16,000 from a sole proprietorship, how much trade or business loss can each deduct on their tax returns?

Answer 1

Answer:

Ray = $200,000

Chuck = $250,000

Explanation:

Determine how much trade or business loss can each deduct on their tax returns

Total loss of Ray = $16000 + $250000 = $266000

since Ray suffered a loss of $16000 from his sole proprietorship and a loss of $250,000 . the total loss suffered from the partnership will not be deductible because it will lead to excessive business loss for the partnership

For RAY : the partnership loss can be calculated as : $250000 - $16000     =$234000

chuck can deduct $250000 loss on tax returns

this is because the threshold is not exceeded as no other loss is created