Question

Problem 11-52 (Algorithmic) (LO. 2, 3, 7) Five years ago Gerald invested $184,000 in a passive activity, his sole investment venture. On January 1, 2018, his amount at risk in the activity was $36,800. His shares of the income and losses were as follows: Year 2018 Income (Loss) ($55,200) (36,800) 56,800 2019 2020 Gerald holds no suspended at-risk or passive activity losses at the beginning of 2018. If an answer is zero, enter "0". a. If losses were limited only by the at-risk rules, how much can Gerald deduct in 2018 and 2019? Year Loss Allowed Suspended 2018 ($55,200) $ 36,800 18,400 2019 ($36,800) 36,800 Total 55,200 b. Refer to the information in part (a) above. If losses were limited by the at-risk and the passive activity loss rules, how much would Gerald be able to deduct in 2018 and 2019? of the allowable at-risk loss for 2018, Gerald may deducts 1 in 2018 due to the passive loss rules and of the allowable at-risk loss from 2019, Gerald may deduct $ in 2019 due to the passive loss rules.

Answer 1

	Five yer ago Gerald Invested $ 184000 in a passive activity
	on 1st January , 2018 , his amount of risk in the activity was $ 36800
	Income and Losses are below
	year	Income /(loss) $
	2018	-55200
	2019	-36800
	2020	56800
Ans-A	As per risk rule , mentioned in the Question - amount to $ 36800
	so any amount more than $ 36800, deduction or adjusted ( set off) available
	year	Income /(loss) $	Allowed limit ( risk) $	Disallow
	2018	-55200	36800	18400	($55200-$36800)
	2019	-36800	0	36800	($36800-0)
	2020	56800
	Total			55200
Ans-C	Assuming Gerald has $ 56800 Income in 2020
	I considering both at Risk and passive activity loss rule)
		Amnt($)
	Income ( passive )	56,800
	Passive Active Limit	36,800
	Suspended under the passive active loss rule	20,000
		Amnt($)
	Income ( passive )	56,800
	Less
	Total losses disallow as calculated above	55200
	Adjusted Income	1,600
Ans-b		Amnt($)
	Total Income	56,800
	Less
	Amount of loss relates 2018	18400
	Amount of loss relates 2018	36800
	Taxable Income	1,600