Ferris owns an interest in,but does not materially participate in,an activity.He has $30,000 at-risk.The business produced a loss in the current year and Ferris's share of the loss is $45,000.Assuming Ferris has no passive income,how much of the $45,000 loss will be deductible by Ferris?
A)$0.
B)$30,000.
C)$45,000.
D)Cannot be determined.

Question

Quizplus · Accepted Answer

Since Ferris does not materially participate in the activity and has no passive income, he cannot deduct any of the loss. The at-risk limitation only applies to the extent of the taxpayer's financial investment, which in this case is $30,000. However, since Ferris's share of the loss is $45,000, he cannot deduct any of it even under the at-risk limitation.

Ferris Owns an Interest In,but Does Not Materially Participate In,an