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Exam 11: Investor Losses

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Question 61

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In the current year,Kelly had a $35,000 loss from a real estate rental activity in which she is a 10% owner.If she is an active participant and if her modified AGI is $100,000,she can deduct $25,000 of the loss.

A) True
B) False

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Question 62

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Chris receives a gift of a passive activity from his father whose basis was $60,000.Suspended losses related to the activity are $18,000.Chris will be allowed to offset the $18,000 suspended losses against future passive income.

A) True
B) False

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Question 63

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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.

Lindsey,an attorney,earns $125,000 from her law practice in the current year.In addition,she receives $50,000 in dividends and interest during the year.Further,she incurs a loss of $40,000 from an investment in a passive activity.What is Lindsey's AGI for the year after considering the passive investment?

Judy incurred $58,500 of interest expense this year related to her investments.Her investment income includes $15,000 of interest,$9,000 of qualified dividends,and a $22,500 net capital gain on the sale of securities.The maximum amount of Judy's investment interest expense deduction for the year is:

Sandra acquired a passive activity three years ago.Until last year,the activity was profitable and her at-risk amount was $300,000.Last year,the activity produced a loss of $100,000,and in the current year,the loss is $50,000.Assuming Sandra has received no passive income in the current or prior years,her suspended passive loss from the activity is:

Jenny spends 32 hours a week,50 weeks a year,operating a bicycle rental store that she owns at a resort community.She also owns a music store in another city that is operated by a full-time employee.Jenny spends 140 hours per year working at the music store.She elects not to group them together as a single activity under the "appropriate economic unit" standard.

Josie,an unmarried taxpayer,has $155,000 in salary,$10,000 in income from a limited partnership,and a $26,000 passive loss from a real estate rental activity in which she actively participates.If her modified adjusted gross income is $155,000,how much of the $26,000 loss is deductible?

Bob realized a long-term capital gain of $8,000.In calculating his net investment income,Bob may elect to include the gain in investment income.

Wolf Corporation has active income of $55,000 and a passive loss of $33,000 in the current year.Wolf cannot deduct the $33,000 loss if it is a closely held C corporation that is not a personal service corporation.