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Let's say an LLC owns some shares in company XYZ, and it also owns a small retailing business. The shares are sold and they make a capital gain of $1,000 this year. And the retailing business loses $500 this year. In what ways can the loss reduce the tax burden of the profit?

  • Do you currently own this LLC or is the whole set up theoretical? – JTP - Apologise to Monica Aug 6 '15 at 20:33
  • @JoeTaxpayer It's theoretical. I'm looking at my options. I do own an LLC retailing business. – thanks_in_advance Aug 6 '15 at 21:29
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In no ways.

Both will be reported to the members on their K1 in the respective categories (or if it is a single member LLC - directly to the individual tax return). The capital gains will flow to your personal Schedule D, and the business loss to your personal Schedule C.

On your individual tax return you can deduct up to 3K of capital losses from any other income. Business loss is included in the income if it is active business, for passive businesses (like rental) there are limitations.

  • By your first line, you mean they are unrelated. Right? – JTP - Apologise to Monica Aug 7 '15 at 3:06
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    Yes, and the fact that both are under LLC is meaningless. In fact, its better not to put personal investments under the same LLC as the retail business, because the whole point of LLC is separation of assets. – littleadv Aug 7 '15 at 4:13
  • Regarding the 3k of capital losses... for how many years later can one use the capital losses to cancel future capital gains? – thanks_in_advance Aug 11 '15 at 7:30
  • Until you run out of it. Which may be never (ask those that got burnt on the dot com crash and will be writing off losses until they die) – littleadv Aug 11 '15 at 8:10
  • @user1883050 you do understand that the 3K write-off rule has nothing to do with the LLC, right? Anyone can write off up to 3k capital losses/year from their ordinary income. – littleadv Aug 11 '15 at 8:11

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