Question

Sullivan, a pilot for Northern Airlines, has adjusted gross income of $92,000 before considering the following losses. The passive activity rules disallow the deduction for a loss in which of the following? I. Sullivan has a $4,500 loss from his ownership interest in Cowco, a feeder-cattle limited partnership. Sullivan is a general partner and is responsible for day-to-day management decisions. II. Sullivan has a $7,000 loss from his ownership interest in Swineco, a feeder-pig limited partnership. Sullivan is a limited partner. ​ a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. Neither statement is correct.

2. Susan is the owner of a 35-unit apartment complex. She spends 950 hours a year managing the property. In addition, she works part-time for a mortgage company. She spends 1,150 hours a year as a bookkeeper at the mortgage company. The apartment complex generated a loss of $32,000, and Susan's adjusted gross income for the current year, before considering the apartment complex, is $48,000. How much of the loss can Susan deduct? a. $- 0 - b. $14,476 c. $16,727 d. $25,000 e. $32,000

3. Karl has the following income (loss) during the current year: Net business income $45,500 Dividends and interest 12,000 Actively managed rental property (34,000) ​ What is Karl's adjusted gross income for this year? a. $23,500 b. $31,400 c. $32,500 d. $45,500 e. $57,500

4. Ricardo owns interests in 3 passive activities: A, B, and C. During the current year, activity A realizes income of $8,000 while activities B and C realize losses of $16,000 and $24,000, respectively. Determine the amount of suspended loss attributable to activity C. a. $- 0 - b. $ 8,000 c. $12,800 d. $19,200 e. $24,000

5. "Active participation" and "real estate professional" are both exceptions to the general rule for passive activity losses with rental real estate. I. One of the tests that an individual must meet to qualify as a real estate professional is that the taxpayer spends more than 50% of his/her time in real property trades or businesses. II. A taxpayer with an AGI of $190,000 qualifying under the real estate professional exception may deduct an unlimited amount of rental real estate losses. ​ a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. Neither statement is correct.

6. Melinda and Riley are married taxpayers. During the year, they completed a single capital asset sale in which a loss of $120,000 is realized on the sale ($15,000 amount realized, less $135,000 adjusted basis) of qualified small business stock. How much of the loss can the taxpayers deduct? a. $3,000 b. $53,000 c. $100,000 d. $103,000 e. $120,000

Answer 1

1b.

As per HOMEWORKLIB RULES only 1st answer can be answered so we are answering only the 1st question. Only statement II is correct. I. Sullivan has a $4,500 loss from his ownership interest in Cowco, a feeder-cattle limited partnership. Sullivan is a general partner and is responsible for day-to-day management decisions.: This statement is not correct because loss from ownership interest from a feeder cattle limited partnership can not be adjusted with adjusted gross income of Sullivan when Sullivan is a general partner. The passive activity rules disallow the deduction for this loss. II. Sullivan has a $7,000 loss from his ownership interest in Swineco, a feeder-pig limited partnership. Sullivan is a limited partner. This statement is correct because loss from ownership interest from a feeder pig limited partnership can be adjusted with adjusted gross income of Sullivan when Sullivan is a partner. The passive activity rules allows the deduction for this loss.