Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 07-30-2011, 03:52 PM
Junior Member
 
Join Date: Jul 2011
Posts: 1
LLC and continuous losses

I made a $1.8M investment into a company in 2007 and have not shown a profit for the business on my tax returns since. For the past 4 years I have written off close to $600,000 in business expenses as an LLC, this has reduced my total adjusted gross income from previous jobs that I have held. Is there a limit to the number of losses that I can continue to write off each year without showing income from the LLC?

The company I invested in is private and submits independent tax returns, I act as the Chairman but do not receive any reportable income.

This seems to be acceptable with the IRS?



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 07-30-2011, 09:31 PM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
“ Is there a limit to the number of losses that I can continue to write off each year without showing income from the LLC?”---> As your business, MMLLC, I guess, which is treated as a partnership, different, even more complicated rules apply. Generally, a partner's share of the partnership loss (including capital loss) is allowed only to the extent of the adjusted basis of his or her partnership interest at the end of the partnership's tax year in which the loss occurred (but before reduction by the current year's loss). This is not necessarily the same as the balance in the partner's capital account. Any excess is allowed as a deduction in later years to the extent that the partner's basis is increased above zero. The rules for MMLLC treated as an S corporation, S corp. shareholders are similar, with one major exception. A shareholder of an S corporation only increases his or her basis in the shares by any loans made directly from the shareholder to the corporation. Indebtedness guaranteed by a shareholder does not increase basis. Thus, a shareholder's basis in his or her interest will be less, in most cases, than a partner's. The partner's or shareholder's allowable loss may be deducted by the partner on his or her individual returns as a business loss, subject to the passive activity rules. Although the partnership itself may not carry the loss backward or forward to other years as a net operating loss, the partners' shares of the loss may result in net operating loss carrybacks or carryovers on their individual returns. Generally, if you have an NOL for a tax year, you must carry back the entire amount of the NOL to the 2 tax years before the NOL year (the carryback period), and then carry forward any remaining NOL for up to 20 years peafter the NOL year (the carryforward period).
“ The company I invested in is private and submits independent tax returns, I act as the Chairman but do not receive any reportable income. This seems to be acceptable with the IRS?”---> An LLC is not subject to taxes; instead, the income attributable to each member( if you are subject to income) is subject to taxes in that member's tax return. Generally, regular payments for services rendered by a member should be treated as "guaranteed payments" by an LLC. Guaranteed payment is a specific term in the Internal Revenue Code, which is defined as payments to a partner in his or her partner capacity for services or the use of capital if determined without regard to the income of the partnership. Guaranteed payments are deductible by the LLC as business expenses and the net profit of the LLC is reduced by that amount. The guaranteed payment is treated as ordinary income. As ordinary income, guaranteed payments aren't subject to income tax and FICA tax withholding as a salary would be; instead, guaranteed payments are subject to estimated income taxes and self-employment taxes.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply



Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
How can a taxpayer convert disallowed passive losses into tax-saving deductible losses? TaxGuru Rental Real-Estate 0 01-21-2011 02:32 PM
Business losses doubleddd2360 Limited Liability Company 1 01-27-2010 10:25 AM
How Not to Take Losses on an S Corp krisrose.704 S-Corporation 0 02-02-2009 10:30 AM
Maximum Losses allowed for rental losses? Kathy Rental Real-Estate 4 07-30-2007 04:11 PM
Net Losses Carryforward? chrisk C-Corporation 1 01-18-2007 10:27 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.