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:

Spinal Cord

A long, thin, tubular structure made up of nervous tissue, which extends from the brainstem to the lower back, carrying nerve impulses between the brain and the body.

Reflex Actions

Automatic and involuntary responses to stimuli facilitated by neural pathways known as reflex arcs, crucial for survival by enabling quick reactions without direct involvement of the brain.

Peripheral Nerves

Nerves that are located outside of the brain and spinal cord, responsible for transmitting sensory and motor information between the central nervous system and the rest of the body.

Endorphins

Peptides produced by the central nervous system and the pituitary gland, known for their ability to act as natural painkillers.