Tobias is a 50% partner in Solomon LLC, which does not invest in real estate. On January 1, Tobias's adjusted basis for his LLC interest is $218,000, and his at-risk amount is $174,400. His share of losses from Solomon for the current year is $283,400, all of which is passive. Tobias owns another investment that produced $152,600 of passive activity income during the year. (Assume that Tobias is a single taxpayer, there were no distributions or changes in liabilities during the year, and that the Solomon loss is Tobias's only loss for the year from any activity.)

Explanation:

A member's allocable share of loss from an LLC taxed as a partnership is deductible only to the extent of the member's outside basis in his LLC interest at the end of the LLC year. First, basis is increased by all positive basis adjustments, including current-year cash and property contributions, income from operations, and nontaxable income. Next, basis is decreased (but not below zero) to account for current-year distributions. Non-liquidating distributions of cash or property are deemed to have been made on the last day of the LLC year if such distributions are advances or draws against a member's share of LLC income.

Tobias's basis limitation restricts his deductible loss to $ 218,000. The at-risk rules then limits his deductible loss to $ 174,400. His passive activity loss rules reduce his deductible loss to 0+152,600=$ 152,600.

Suspension of loss:

704(d) Overall limitation- Deductible loss $218,000 Suspended Loss $ 20,000 (152,600-218,000)

465 At-risk limitation      - Deductible loss  $174,400 Suspended Loss $25,000 (152,600-20,000-174,400)

469 Passive Loss limitation - Deductible Loss $ 152,600 Suspended loss $ 174,400.

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