Leigh,who owns a 50% interest in a sporting goods store,was a material participant in the activity for the last fifteen years.She retired from the sporting goods store at the end of last year and will not participate in the activity in the future.However,she continues to be a material participant in an office supply store in which she is a 50% partner.The operations of the sporting goods store resulted in a loss for the current year and Leigh's share of the loss is $40,000.Leigh's share of the income from the office supply store is $75,000.She does not own interests in any other activities.

Question

Quizplus · Accepted Answer

Because Leigh materially participated in the sporting goods activity for at least five of the last ten taxable years before the current year (Test 5),she is still considered an active participant in that activity.Therefore,her loss is an active loss that can be offset against her active income from the office supply store.

Leigh,who Owns a 50% Interest in a Sporting Goods Store,was