Exam 11: Investor Losses

In 2012, Emily invests $100,000 in a limited partnership that is not a passive activity.During 2012, her share of the partnership loss is $70,000.In 2013, her share of the partnership loss is $50,000.How much can Emily deduct in 2012 and 2013?

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.

Art owns significant interests in a hardware store and a bookstore at a mall in Washington, D.C. He also owns a hardware store and a bookstore at a mall in San Francisco. Which of the following is not a way in which the interests may be grouped?

Ned, a college professor, owns a separate business (not real estate) in which he participates in the current year.He has one employee who works part-time in the business.

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

Stuart is the sole owner and a material participant in a business in which he has $50,000 at risk.If the business incurs a loss of $80,000 from operations, Stuart can deduct the full amount.

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?

Rachel participates 150 hours in Activity A and 400 hours in Activity B, both of which are nonrental businesses.Both activities are passive.

In the current year, Louise invests $50,000 for a 10% interest in a passive activity.Her share of the loss this year is $10,000.If this is her only passive activity, the $10,000 loss from the activity this year is suspended for use in a future year.

Joyce, an attorney, earns $100,000 from her law practice in the current year.In addition, she receives $35,000 in dividends and interest during the year.Further, she incurs a loss of $35,000 from an investment in a passive activity.What is Joyce's AGI for the year after considering the passive investment?

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.

Jed spends 32 hours a week, 50 weeks a year, operating a DVD rental store that he owns.He also owns a music store in another city that is operated by a full-time employee.He elects not to group them together as a single activity under the "appropriate economic unit" standard.Jed spends 40 hours per year working at the music store.

In 2012, Pearl invests $80,000 for a 10% partnership interest in an activity in which she is a material participant.The partnership reports losses of $500,000 in 2012 and $450,000 in 2013.Pearl's share of the partnership's losses is $50,000 in 2012 and $45,000 in 2013.How much of the losses can Pearl deduct?

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).

Charles owns a business with two separate departments. Department A produces $100,000 of income and Department B incurs a $60,000 loss. Charles participates for 550 hours in Department A and 100 hours in Department B. He has full-time employees in both departments.

Joyce owns an activity (not real estate) in which she participates for 100 hours a year; her husband participates for 450 hours.Joyce qualifies as a material participant.

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.

Gail exchanges passive Activity A, which has suspended losses of $15,000, for passive Activity B in a nontaxable exchange.The new owner of passive Activity A can offset the $15,000 suspended losses against passive income in the future.

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.

Roxanne, who is single, has $125,000 of salary, $10,000 of income from a limited partnership, and a $26,000 passive loss from a real estate rental activity in which she actively participates.Her modified adjusted gross income is $125,000.Of the $26,000 loss, how much is deductible?