Fundamentals of Taxation 2011 4th Edition by Ana Cruz, Debra Prendergast, Dan Schisler, Michael Deschamps

Exercise 48

Jackson invested $190,000 in a passive activity five years ago. On January 1, 2007, his at-risk amount in the activity was $45,000. His share of the income and losses in the activity were $52,000 loss in 2007, $20,000 loss in 2008, and $80,000 gain in 2009. How much can Jackson deduct in 2007 and 2008? What is his taxable income from the activity in 2009? Keep in mind the at-risk rules as well as the passive loss rules.