In 2017, Glenn recorded a $108,000 loss on a passive activity. None of the loss is attributable to AMT adjustments or preferences. She has no other passive activities. Which of the following statements is correct?
A)In 2017, Glenn can deduct $108,000 for regular income tax purposes and for AMT purposes.
B)Glenn reports a $108,000 tax preference in 2017 as a result of the passive activity.
C)For regular income tax purposes, none of the passive activity loss is allowed in 2017.
D)In 2017, Glenn reports a positive adjustment of $25,000 as a result of the passive activity loss.

Question

Quizplus · Accepted Answer

For regular income tax purposes, passive activity losses can only be used to offset passive activity income. Since Glenn has no other passive activities, the losses cannot be used in 2017. However, the losses can be carried forward to offset passive income in future years or potentially used to offset gains from the sale of the passive activity. Option A is incorrect because Glenn cannot deduct the loss in 2017 for regular income tax purposes. Option B is incorrect because there is no tax preference resulting from the passive activity loss. Option D is incorrect because there is no positive adjustment resulting from the passive activity loss.

In 2017, Glenn Recorded a $108,000 Loss on a Passive