Faye dies owning an interest in a passive activity property (adjusted basis of $150,000, suspended losses of $52,000, and a fair market value of $180,000).What, if any, can be deducted on her final income tax return?
A)$52,000.
B)$30,000.
C)$22,000.
D)$0.
E)None of these.

Question

Quizplus · Accepted Answer

Since Faye died owning an interest in a passive activity property, her suspended losses will become deductible in the final year on her final income tax return. The amount of the deduction will be limited to the lesser of the suspended losses or the excess of the fair market value of the property over its adjusted basis. In this case, the excess is $30,000 ($180,000 - $150,000). Therefore, the maximum deduction Faye's estate can claim on her final income tax return is $22,000 ($30,000 - $8,000 of suspended losses that exceed the excess).

Faye Dies Owning an Interest in a Passive Activity Property