Question

Problem 7-38 (LO. 6) 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 2020, 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 "O". Timothy has an excess business loss of $ o He may use $ 290,000 of his share of the $580,000 LLC business loss to offset nonbusiness income Prada has an excess business loss of $ 40,000 X. She may use $ 250,000 X 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 ✓ Feedback Check My Work If a noncorporate taxpayer has an excess business loss for the year, it is not allowed.

Answer 1

Section 2304 of the Act amended IRC Section 461 provides that $250,000 (or $500,000 for married taxpayers filing jointly) limitation on excess business losses for non-corporate taxpayers does not apply until January 1, 2021. Due to which , taxpayers will be able to fully deduct business losses arising in 2018, 2019 and 2020.

Hence, Parda has an excess business loss of $ 0 .She may use $ 290,000 of her share of the $ 580,000 LLC business loss to offset Nonbusiness income.