In 2018, Glenn recorded a $108,000 loss on a passive activity. None of the loss is attributable to AMT adjustments or preferences. She has no other passive activities. Which of the following statements is correct?
A) In 2018, Glenn can deduct $108,000 for regular income tax purposes and for AMT purposes.
B) Glenn reports a $108,000 tax preference in 2018 as a result of the passive activity.
C) For regular income tax purposes, none of the passive activity loss is allowed in 2018.
D) In 2018, Glenn reports a positive adjustment of $25,000 as a result of the passive activity loss.

Question

Quizplus · Accepted Answer

For regular income tax purposes, passive activity losses can only be offset against passive activity income. Since Glenn has no other passive activity income, she cannot deduct the $108,000 loss for regular income tax purposes in 2018. However, she may be able to carry forward the loss to future years when she has passive activity income or offset it against any passive activity income she earns in the future. The other options are incorrect because Glenn cannot deduct the loss for AMT purposes (there are no AMT adjustments or preferences related to the loss), she does not report a tax preference related to the loss, and there is no information indicating a positive adjustment related to the loss.

In 2018, Glenn Recorded a $108,000 Loss on a Passive