4. Lisa has invested in 2 companies owned by her daughter. Lisa is a limited par

Question

4. Lisa has invested in 2 companies owned by her daughter. Lisa is a limited partner in Llamas Unlimited, LLC and the Yarn Barn, LLC. Lisa’s at-risk basis in Llamas Unlimited is $800,000 and her share of the income this year is $150,000. Lisa’s at-risk basis in the Yarn Barn is $200,000 and her share of the loss this year is $350,000. This is the first time either company has had any losses and she has heard that she might not get to deduct all of her loss this year. She has asked you to explain how her income and losses will be handled on her return this year.

Explanation / Answer

This is depending on the legal type of business that you own. In this case Lisa invests in 2 Partnerships LLC’s. For those types of companies you can offset losses up to the amount of your investment “basis” in the business. In this case Lisa has $800,000 risk basis in Llamas Unlimited and $200,000 in Yarn Barn. However in this case Lisa occur $350,000 loss in Yarn Barn LLc. It is beyond the risk basis of the Yarn Barn. Therefore she can only deduct $200,000 loss in her return. Remaining losses carry back or carry forward for deduct in return for future or past years.

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