Nell earns $50,000 salary income in the current year. In addition, Nell sells a passive activity...
Nell earns $50,000 salary income in the current year. In addition, Nell sells a passive activity with an adjusted basis of $45,000 for $155,000 in the current year. Suspended losses attributable to this property total $45,000. Nell owns another separate passive activity which has $10,000 passive loss for the current year and $80,000 suspended passive losses from prior years. Nell will report the following on her current year income tax return (as a result of just these transactions):
a. $$50,000 salary income and an additional $110,000 from the sale of the passive activity
b. $25,000 salary income and $0 additional taxable income (because all $110,000 gain from the sale of the passive activity offset by losses and an additional $25,000 of passive loss is available to deduct against the salary income.
c. $50,000 salary income and $0 additional taxable income (because all $110,000 gain from the sale of the passive activity is offset by losses).
d. $50,000 salary income and an additional $65,000 gain from the sale of the passive activity.
e. None of a-d is correct
Homework Answers
As the name implies, a passive activity loss is a financial loss that comes from a business or investment activity in which you do not play an active role.
any unused passive losses can be carried forward to future tax years
Answer - C
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Nell earns $50,000 salary income in the current year. In
addition, Nell sells a passive activity...
Exercise 11-28 (Algorithmic) (LO. 3) Lucy sells her partnership interest, a passive activity, with an adjusted...
Exercise 11-28 (Algorithmic) (LO. 3) Lucy sells her partnership interest, a passive activity, with an adjusted basis of $341,500 for $375,650. In addition, she has current and suspended losses of $51,225 associated with the partnership and has no other passive activities. a. Calculate Lucy's total gain and her current deductible loss. Her total gain is $ 25,000 X and her deductible loss is $ -3,000 X. b. What type of income can the deductible loss offset? Lucy's deductible loss is...
Five years ago, Gerald invested $150,000 in a passive activity, his sole investment venture. On January...
Five years ago, Gerald invested $150,000 in a passive activity, his sole investment venture. On January 1, 2018, his amount at risk in the activity was $30,000. His shares of the income and losses were as follows: Year Income (Loss) 2018 ($40,000) 2019 (30,000) 2020 50,000 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...
Problem 6-33 (LO. 5, 6, 8) Five years ago, Gerald invested $150,000 in a passive activity,...
Problem 6-33 (LO. 5, 6, 8) Five years ago, Gerald invested $150,000 in a passive activity, his sole investment venture. On January 1, 2018, his amount at risk in the activity was $30,000. His shares of the income and losses were as follows: Year Income (Loss) 2018 ($40,000) 2019 (30,000) 2020 50,000 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...
Problem 11-43 (LO. 3) Sarah has investments in four passive activity partnerships purchased several years ago....
Problem 11-43 (LO. 3) Sarah has investments in four passive activity partnerships purchased several years ago. Last year the income and losses were as follows: Activity Income (Loss) $30,000 (30,000) (15,000) (5,000) In the current year, she sold her interest in Activity D for a $10,000 gain. Activity D, which had been profitable until last year, had a current loss of $1,500. Answer the following questions to determine how the sale of Activity D affects Sarah's taxable income in the...
Problem 11-44 (Algorithmic) (LO. 3) Leon sells his interest in a passive activity for $126,500. Determine...
Problem 11-44 (Algorithmic) (LO. 3) Leon sells his interest in a passive activity for $126,500. Determine the tax effect of the sale based on each of the following independent facts: If an amount is zero, enter "0". a. Adjusted basis in this investment is $44,275. Losses from prior years that were not deductible due to the passive activity loss restrictions total $48,703. The taxable gain is $ 33,522 The suspended losses at the end of the year are s b....
Leon sells his interest in a passive activity for $159,000. Determine the tax effect of the...
Leon sells his interest in a passive activity for $159,000. Determine the tax effect of the sale based on each of the following independent facts: a. Adjusted basis in this investment is $55,650. Losses from prior years that were not deductible due to the passive activity loss restrictions total $61,215. b. Assume the same sales price but the adjusted basis in this investment is $119,250. Losses from prior years that were not deductible due to the passive activity loss restrictions...
Please show all calculations. 14. Shunwei reports the following income and loss: Salary Income from activity...
Please show all calculations.
14. Shunwei reports the following income and loss: Salary Income from activity A Loss from activity B Loss from activity C $ 100,000 50,000 (20,000) ( 40,000) Activities A, B, and C are all passive activities. (FREE BEE) Based on this information, Chunwei has A) adjusted gross income of $90,000 B) salary of $100.000 and deductible net losses of $10,000 C) salary of $100.000 and net passive income of $50,000 D) salary of $100,000, passive income...
Problem 11-52 (Algorithmic) (LO. 2, 3, 7) Five years ago Gerald invested $184,000 in a passive...
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...
QUESTION 32 For the current year, Harry reported salary and taxable interest income of $50,000. His...
QUESTION 32 For the current year, Harry reported salary and taxable interest income of $50,000. His capital asset transactions during the year were as follows: Long-term capital loss ($5,000) Long-term capital gain $1,000 For the current year, what amount should Harry report as sed gross income? a $50,000 ob $45,000 oc $45,000 . 547,000 None of the above QUESTION 33 Which, if any of the following statements does not correctly describe the kiddie tax a if the tax applies, it...
Nora is an active participant in the rental condominium property she owns. During the year, the...
Nora is an active participant in the rental condominium property she owns. During the year, the property generates a ($30,000) loss; however, she has sufficient tax basis and at-risk amounts to absorb the loss. If Nora has $85,000 of salary, $10,000 of long-term capital gains, $3,000 of dividends, and no additional sources of income or deductions, how much loss can she deduct? A. Zero; losses from rental property are passive losses and can only be offset by passive income. B....
Exercise 11-28 (Algorithmic) (LO. 3) Lucy sells her partnership interest, a passive activity, with an adjusted basis of $341,500 for $375,650. In addition, she has current and suspended losses of $51,225 associated with the partnership and has no other passive activities. a. Calculate Lucy's total gain and her current deductible loss. Her total gain is $ 25,000 X and her deductible loss is $ -3,000 X. b. What type of income can the deductible loss offset? Lucy's deductible loss is...
Problem 11-43 (LO. 3) Sarah has investments in four passive activity partnerships purchased several years ago. Last year the income and losses were as follows: Activity Income (Loss) $30,000 (30,000) (15,000) (5,000) In the current year, she sold her interest in Activity D for a $10,000 gain. Activity D, which had been profitable until last year, had a current loss of $1,500. Answer the following questions to determine how the sale of Activity D affects Sarah's taxable income in the...
Problem 11-44 (Algorithmic) (LO. 3) Leon sells his interest in a passive activity for $126,500. Determine the tax effect of the sale based on each of the following independent facts: If an amount is zero, enter "0". a. Adjusted basis in this investment is $44,275. Losses from prior years that were not deductible due to the passive activity loss restrictions total $48,703. The taxable gain is $ 33,522 The suspended losses at the end of the year are s b....
Please show all calculations.
14. Shunwei reports the following income and loss: Salary Income from activity A Loss from activity B Loss from activity C $ 100,000 50,000 (20,000) ( 40,000) Activities A, B, and C are all passive activities. (FREE BEE) Based on this information, Chunwei has A) adjusted gross income of $90,000 B) salary of $100.000 and deductible net losses of $10,000 C) salary of $100.000 and net passive income of $50,000 D) salary of $100,000, passive income...
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...
QUESTION 32 For the current year, Harry reported salary and taxable interest income of $50,000. His capital asset transactions during the year were as follows: Long-term capital loss ($5,000) Long-term capital gain $1,000 For the current year, what amount should Harry report as sed gross income? a $50,000 ob $45,000 oc $45,000 . 547,000 None of the above QUESTION 33 Which, if any of the following statements does not correctly describe the kiddie tax a if the tax applies, it...
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