Sandra acquired a passive activity three years ago. Until last year, the activity was profitable and her at-risk amount was $300,000. Last year, the activity produced a loss of $100,000, and in the current year, the loss is $50,000. Assuming Sandra has received no passive activity income in the current or prior years, her suspended passive activity loss from the activity is:

Question

Quizplus · Accepted Answer

When a passive activity produces a loss, the at-risk amount is reduced by the amount of the loss. In the current year, Sandra's at-risk amount was $250,000 ($300,000 at-risk amount at the beginning of the year - $100,000 loss from last year + $50,000 loss from the current year). Since she received no passive activity income in the current or prior years, she is not able to deduct the full $150,000 loss in the current year. Therefore, $100,000 loss from last year is suspended and carried forward to future years along with $50,000 loss from the current year.

Sandra Acquired a Passive Activity Three Years Ago