During the year, J sold his interest in Sterling XXI, a limited partnership, for a gain of $30,000.At the time of the sale, J had suspended losses from Sterling of $50,000.For the year, J also had a loss from another passive activity of $35,000.As a result, J's taxable income will decrease by $50,000, and he will have a suspended loss of $5,000.

Question

Quizplus · Accepted Answer

J's gain from selling his interest in Sterling XXI will offset $30,000 of his $50,000 suspended losses, leaving him with $20,000 of suspended losses. The loss from his other passive activity cannot be used to offset any of the suspended losses. Therefore, J's taxable income will not decrease by $50,000 and he will have a suspended loss of $20,000, not $5,000.

During the Year, J Sold His Interest in Sterling XXI