If a taxpayer sells a passive activity with suspended passive activity losses from prior years, what type of income can generally be offset by the suspended passive losses in the year of sale?
A)Passive activity income
B)Portfolio income
C)Active business income
D)Any of these types of income can be offset
E)None of the choices are correct. The suspended losses disappear when the passive activity is sold.

Question

Quizplus · Accepted Answer

When a taxpayer sells a passive activity, the suspended passive activity losses from prior years can generally be offset against any type of income in the year of sale, including passive activity income, portfolio income, and active business income. This allows the taxpayer to utilize the losses that were previously unusable on a dollar-for-dollar basis against any income, providing a tax benefit in the year of sale.

If a Taxpayer Sells a Passive Activity with Suspended Passive