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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 13196
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Customer Question

Husband and Wife are both general partner in an LLC, Husband actively participates, wife does not. Can the Wife losses be treated as non-passive loss to both Husband and Wife. The K-1 shows a negative capital, however they both have a recourse loan that is three times higher than the negative capital.
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

The wife's losses are not treated as passive if she did not materially participate.

The negative capital could trigger capital gains tax. The partner can assume some of the debt of the llc personally and that can be added to the basis. Either that, or the partner can contribute more assets

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Customer: replied 1 year ago.

Based on what I am reading if a person is married, the spouse's work in the business can be counted towards your ,the other spouse participation hours. Am I reading this wrong.


 


The loan is a recourse loan therefore the LLC member is personally liable, wouldn't this give him basis?

Expert:  Megan C replied 1 year ago.
What type of business is this? Is it a business, or rental real estate? There's a difference

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