Mara owns an activity with suspended passive losses from prior years of $13,000.In the current year,Mara becomes a material participant in the activity.This year the activity generates $6,000 of income.The net effect of this activity on Mara's current year AGI is a(n)
A)increase of $6,000.
B)decrease of $13,000.
C)0)
D)decrease of $7,000.

Question

Quizplus · Accepted Answer

Since Mara became a material participant in the activity, she is allowed to use the suspended passive losses from prior years to offset the current year income from the activity. Therefore, there is no net effect on Mara's current year AGI.

Mara Owns an Activity with Suspended Passive Losses from Prior