Question

Ling owns 3 passive investments. During the last two years, she has the following income and loss from each activity:

	2014	2015
Activity 1	$(14,000)	$(6,000)
Activity 2	(6,000)	(1,000)
Activity 3	8,000	12,000

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At the end of 2015 what is the amount of suspended loss allocated to Activity 2?

	a.	​$1,695
	b.	​$1,815
	c.	​$5,185
	d.	​$5,305
	e.	​$7,000

According to the test bank 2016, the answer is (a). Please explain. Thank you!

Answer 1

Answer is (a)

	Activity 1	Activity 2	Activity 3
Porift or loss from the activity 2014	(14,000)	(6,000)	8,000.00
Allocation of prifit of Activity 3 (14:6 - Ratio)	5,600	2,400
Net Loss Carried Forward	(8,400)	(3,600)
Porift or loss from the activity 2015	(6,000)	(1,000)	12,000.00
Total Loss For the year 2015	(14,400)	(4,600)
Allocation of prifit of Activity 3 (144:46 - Ratio)	9,095	2,905
At the end of 2015 Amount of suspended loss	(5,305)	(1,695)

Computation of Allocation of profit of Activity 3, 2014

Allocation of profit of Activity 3 (14:6 - Ratio)	8000*14/20	2400
	5,600.00	2,400.00

Computation of Allocation of profit of Activity 3, 2015

Allocation of profit of Activity 3 (144:46 - Ratio)	12000*144/190	12000*46/190
	9095	2905