Exam 11: Investor Losses

Oriole Corporation has active income of $45,000 and a passive activity loss of $23,000 in the current year. Under an exception, Oriole can deduct the $23,000 loss if it is a personal service corporation.

Kelly, who earns a yearly salary of $120,000, sold an activity with a suspended passive activity loss of $44,000. The activity was sold at a loss and Kelly has no other passive activities. The suspended loss is not deductible.

David earned investment income of $20,000, incurred investment interest expense of $12,000, and other investment expenses of $9,000 during the current year. David can deduct $12,000 of investment interest for this year.

Tess owns a building in which she rents apartments to tenants and operates a restaurant. Which of the following statements is incorrect?

Lucy owns and actively participates in the operations of an apartment complex that produces a $50,000 loss during the year. Her modified AGI is $125,000 from an active business. Disregarding any at-risk amount limitation, she may deduct $25,000 of the loss, and the remaining $25,000 is a suspended passive activity loss.

From January through November, Vern participated for 420 hours as a salesman in a partnership in which he owns a 50% interest. The partnership has four full-time employees. During December, Vern spends 110 hours cleaning the store and painting the walls in order to meet the material participation standards. Vern qualifies as a material participant.

Anita owns Activity A which produces active income and Activity B which produces losses. From a tax planning perspective, Anita will be better off if Activity B is a passive activity.

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

Art's at-risk amount in a passive activity was $60,000 at the beginning of 2017. His loss from the activity in 2017 is $80,000, and he had no passive activity income during the year. Art had $20,000 of passive activity income from the activity in 2018. Under the passive activity loss rules, Art's suspended loss at the end of 2018 is:

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

Jack owns a 10% interest in a partnership not real estate) in which his at-risk amount is $42,000 at the beginning of the year. During the year, the partnership borrows $80,000 on a nonrecourse note and incurs a loss of $60,000 from operations. Jack's at-risk amount at the end of the year is $44,000.

Wolf Corporation has active income of $55,000 and a passive activity loss of $33,000 in the current year. Wolf cannot deduct the $33,000 loss if it is a closely held C corporation that is not a personal service corporation.

Pablo, who is single, has $95,000 of salary, $10,000 of income from a limited partnership, and a $27,000 passive activity loss from a real estate rental activity in which he actively participates. His modified adjusted gross income is $95,000. Of the $27,000 loss, how much is deductible?

Joyce, an architect, earns $100,000 from her practice in the current year. In addition, she receives $35,000 in dividends, capital gains, and annuity income during the year. Further, she incurs a loss of $35,000 from an investment in a passive activity. Joyce's AGI for the year after considering the passive investment is $100,000.

Several years ago, Joy acquired a passive activity. Until 2016, the activity was profitable. Joy's at-risk amount at the beginning of 2016 was $250,000. The activity produced losses of $100,000 in 2016, $80,000 in 2017, and $90,000 in 2018. During the same period, no passive activity income was recognized. How much is suspended under the at-risk rules and the passive activity loss rules at the beginning of 2019? a.\ 0 \ 270,000. b.\ 20,000. \ 250,000. c.\ 30,000. \ 240,000. d.\ 260,000. \ 10,000.

Which of the following factors should be considered in determining whether an activity is treated as an appropriate economic unit?

Kate dies owning a passive activity with an adjusted basis of $100,000. Its fair market value at that date is $130,000. Suspended losses relating to the property were $45,000.

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?

Caroyl made a gift to Tim of a passive activity adjusted basis of $50,000, suspended losses of $20,000, and a fair market value of $80,000). No gift tax resulted from the transfer.

Rick, a computer consultant, owns a separate business not real estate) in which he participates. He has one employee who works part-time in the business.