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To be sure about who knows what when you use TOR, there is this excellent EFF article [1].

[1] https://www.eff.org/pages/tor-and-https

So then is LOCATION visible to the ISP before it hits the first Tor Relay because the ISP knows the real IP Address of the user making the request?

TL;DR Yes.

The ISP knows that your IP is connecting to the IP of a TOR relay. (EDIT: the ISP is technically renting the IP address to you, so they obviously know it.)

And the admin of your network knows it too, which is exactly why the guy got caught.

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