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)an increase of $6,000.
B)a decrease of $13,000.
C)0)
D)a decrease of $7,000.

Question

Quizplus · Accepted Answer

Since Mara became a material participant in the activity, she is now allowed to deduct the $13,000 suspended passive losses from prior years against the $6,000 of income generated in the current year. This results in a net effect of $0 on Mara's current year AGI.

Mara Owns an Activity with Suspended Passive Losses from Prior