Thank you for your reply and for your page to Rick19744. Much appreciated.
FYI, I am a local tax attorney and we are preparing returns for our client, which has the situation explained above.
In short, a key question I am asking is whether there is a valid argument to IRS that there really is no loss here, let alone a Hobby Loss. Yes, this is a LLC taxed as partnership and the items are passed-through individually, but nevertheless, Investment Income does exceed Operating Expenses, so there should be considered, at least informally with IRS, to be no loss / Hobby Loss.
This is the case with a C Corporation, where this situation (Investment Income exceeding Operating Expenses) would be considered a net profit.
Really interested any input on this issue, including any IRS pronouncements on this or analogous issues.
