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Exam 11: Investor Losses

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Question 21

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Hugh has four passive activities which generate the following income and losses in the current year. How much of the $80,000 net passive loss can Hugh deduct this year? Calculate the suspended losses (by activity).

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None.The suspended l...

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Question 22

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Kathy is a full-time educator,but she owns an apartment building and devotes 550 hours to managing the activity.All losses from the rental activity will be considered nonpassive and deductible against active income because she is a real estate professional.

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Question 23

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Judy incurred $58,500 of interest expense this year related to her investments.Her investment income includes $15,000 of interest,$9,000 of qualified dividends,and a $22,500 net capital gain on the sale of securities.The maximum amount of Judy's investment interest expense deduction for the year is:

Jenny spends 32 hours a week,50 weeks a year,operating a DVD rental store that she owns.She also owns a music store in another city that is operated by a full-time employee.Jenny spends 140 hours per year working at the music store.She elects not to group them together as a single activity under the "appropriate economic unit" standard.

Chris receives a gift of a passive activity from his father whose basis was $60,000.Suspended losses related to the activity are $18,000.Chris will be allowed to offset the $18,000 suspended losses against future passive income.

David participates 580 hours in an activity during the year; others participate for 1,400 hours.David is a material participant in the activity.

Sandra acquired a passive activity three years ago.Until last year,the activity was profitable and her at-risk amount was $300,000.Last year,the activity produced a loss of $100,000,and in the current year,the loss is $50,000.Assuming Sandra has received no passive income in the current or prior years,her suspended passive loss from the activity is:

Anne sells a rental house for $100,000 (adjusted basis of $55,000).During her ownership,$60,000 of losses have been suspended under the passive activity loss rules.Determine the tax treatment to Anne on the disposition of the property.

Last year,Ted invested $100,000 for a 50% interest in a partnership in which he was a material participant.The partnership incurred a loss,and Ted's share was $150,000.Which of the following statements is incorrect?

Samantha sells a passive activity (adjusted basis of $50,000) for $90,000.Suspended losses attributable to this property total $30,000.The realized gain and the taxable gain are:

Orange Corporation,a closely held (non-personal service)C corporation,earns active income of $300,000 in the current year.The corporation also receives $35,000 in dividends and incurs a loss of $50,000 from an investment in a passive activity.What is Orange's income for the year after considering the passive investment?

All of a taxpayer's tax credits relating to a passive activity can be utilized when the activity is sold at a loss.

Which of the following is not a factor that should be considered in determining whether an activity is treated as an appropriate economic unit?

Individuals can deduct from active or portfolio income losses of up to $25,000 from real estate rental activities in which they actively participate.

Sarah,who owns a 50% interest in a grocery store,was a material participant in the activity for the last 25 years.She retired from the grocery store at the end of last year and will not participate in the activity in the future.However,she continues to be a material participant in an office supply store in which she is a 50% partner.The operations of the grocery store resulted in a loss for the current year and Sarah's share of the loss is $40,000.Sarah's share of the income from the office supply store is $75,000.She does not own interests in any other activities.

Jon owns an apartment building in which he is a material participant and a computer consulting business.Of the 2,000 hours he spends on these activities during the year,55% of the time is spent operating the apartment building and 45% of the time is spent in the computer consulting business.

Judy owns a 20% interest in a partnership (not real estate)in which her at-risk amount was $35,000 at the beginning of the year.The partnership borrowed $50,000 on a recourse note and made a $40,000 profit during the year.Her at-risk amount at the end of the year is $43,000.

Art's at-risk amount in a passive activity was $60,000 at the beginning of 2011.His loss from the activity in 2011 is $80,000,and he had no passive activity income during the year.Art had $20,000 of passive income from the activity in 2012.Under the passive loss rules,Art's suspended loss at the end of 2012 is:

Nora acquired passive activity A several years ago that until 2011 was profitable.However,the activity produced losses of $100,000 in 2011 and $50,000 in 2012.Nora had passive income from activity B of $40,000 in 2011 and $0 in 2012.How much loss is suspended from activity A in each year?

Match the treatment for the following types of transactions.