Rachel acquired a passive activity several years ago. Until 2015, the activity was profitable, and Rachel's at-risk amount at the beginning of 2015 was $300,000. The activity produced losses of $80,000 in 2015, $50,000 in 2016, and $70,000 in 2017. In 2018, the activity produced income of $90,000. How much is Rachel's suspended passive activity loss at the beginning of 2019?

Question

Quizplus · Accepted Answer

At the beginning of 2015, Rachel's at-risk amount was $300,000. The losses she incurred were $80,000 in 2015, $50,000 in 2016, and $70,000 in 2017. Therefore, her total losses from 2015-2017 were $200,000, which is more than her at-risk amount of $300,000. Therefore, her suspended passive activity loss at the beginning of 2018 is $100,000 ($300,000 - $200,000). In 2018, the activity produced income of $90,000, which means that $90,000 of the suspended passive activity loss was used to reduce the income. Therefore, the remaining suspended loss at the beginning of 2019 is $110,000 ($100,000 - $90,000). Therefore, the answer is B.

Rachel Acquired a Passive Activity Several Years Ago