Alex has three passive activities with at-risk amounts in excess of $100,000 for each.During the year, the activities produced the following income (losses). Alex's suspended losses are as follows:

Question

Alex has three passive activities with at-risk amounts in excess of $100,000 for each.During the year, the activities produced the following income (losses).  Alex's suspended losses are as follows:

Quizplus · Accepted Answer

The total at-risk amounts in excess of $100,000 for all three activities is $300,000. Therefore, each activity has an at-risk amount of at least $100,000. Since there are no losses in excess of $100,000, there is no need to allocate any losses to C. Therefore, options A and D can be eliminated. Option B allocates $37,500 to each of the two profitable activities, which means that these profits will be taxed at a higher rate due to the suspended losses. Therefore, option B is not the best choice. Option C allocates $56,250 to the profitable activity with the largest at-risk amount and $18,750 to the other profitable activity, which reduces the taxable income of both activities and minimizes the tax impact of the suspended losses. Therefore, option C is the best choice.

Alex Has Three Passive Activities with At-Risk Amounts in Excess