Gwen and Travis Organized a New Business as an LLC

question 95

Multiple Choice

Gwen and Travis organized a new business as an LLC in which they own equal interests.The new business generated a $10,000 operating loss its first year.Travis has no other taxable income for the current year,but had sufficient taxable income in prior years to pay tax in the 28% tax bracket.Which of the following statements regarding Travis' tax savings from the current LLC loss is true?

• A)Travis can carry his share of LLC loss back two years as a net operating loss,and request an immediate tax refund of $1,400.
• B)Travis can only carry his share of LLC loss forward,and will get tax savings only when the LLC generates future income.
• C)Travis can only use his share of the LLC loss in the current year,and will receive no tax savings.
• D)The LLC will reallocate Travis share of the loss to Gwen,who can claim $1,750 of additional tax savings.

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Definitions:

Proactive Interference

The phenomenon where old memories hinder the recall of newly learned information.

Retroactive Interference

A phenomenon in psychology where newly acquired information interferes with the recall of previously learned information.

Repression

A psychological defense mechanism where distressing thoughts, memories, or impulses are unconsciously pushed out of conscious awareness.

Semantic Memory

A type of long-term memory involving the storage of general knowledge, facts, concepts, and meanings not tied to specific experiences.