Josh has investments in two passive activities.Activity A,acquired three years ago,produces income in the current year of $60,000.Activity B,acquired last year,produces a loss of $100,000 in the current year.At the beginning of this year,Josh's at-risk amounts in Activities A and B are $10,000 and $100,000,respectively.What is the amount of Josh's suspended passive loss with respect to these activities at the end of the current year?

Question

Quizplus · Accepted Answer

Josh's at-risk amount in Activity A is $10,000, which means that he can only deduct up to $10,000 of losses from Activity A. Since Activity A produced income of $60,000, there is no loss to suspend.

However, in Activity B, there is a loss of $100,000, which exceeds Josh's at-risk amount of $100,000. Therefore, only $40,000 of the loss can be currently deducted. The remaining $60,000 is suspended and carried forward to future years as a suspended passive loss.

Thus, the amount of Josh's suspended passive loss with respect to these activities at the end of the current year is $60,000 - $20,000 (the excess of the loss over the at-risk amount) = $40,000.

Therefore, the correct answer is (C) $40,000.

Josh Has Investments in Two Passive Activities