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:

Due Date

The specific day by which a payment, project, or assignment is required to be completed or submitted.

Complement Rate

In the context of interest rates, this refers to the difference between 100% and the stated rate, used in various financial calculations.

Cash Discount

A reduction in the invoice price offered by the seller to encourage early payment by the buyer.

Invoice Date

The date when an invoice is issued, marking the beginning of the grace period for payment.