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Sarah is a 10 percent owner in Canine Connection, LLC, a day-care center for dogs. She is also a 15 percent owner in Little Laughter, LLC a...
Sarah is a 10 percent owner in Canine Connection, LLC, a day-care center for dogs. She is also a 15 percent owner in Little Laughter, LLC a successful children’s clothing store. She does not materially participate in either business. Her at-risk and loss/income for the current year is as follows:
Canine Connection - At-risk = $175,000; Loss of $275,000
Little Laughter - At-risk = $25,000; Income of $125,000
She also has wage income of $80,000 and capital gain income of $30,000. Which of the following statements is true?
a. The loss suspended because of the at-risk rules is $75,000 and the loss suspended because of the passive activity loss rules is $75,000.
b. The loss suspended because of the at-risk rules is $75,000 and the loss suspended because the passive activity loss rules is $0.
c. The loss suspended because of the at-risk rules is $50,000 and the loss suspended because the passive activity loss rules is $100,000.
d. The loss suspended because of the at-risk rules is $100,000 and the loss suspended because of the passive activity loss rules is $50,000.
