Question 1

Explain how a taxpayer's at-risk amount in a business venture is adjusted periodically.

Accepted Answer

The answer of Explain how a taxpayer's at-risk amount in...

Question 2

During the current year,Ryan performs personal services as follows: 700 hours in his management consulting practice,650 hours in a real estate development business,and 550 hours in an apartment leasing operation.He expects that losses will be realized from the two real estate ventures while his consulting practice will show a profit.Ryan files a joint return with his wife whose salary is $125,000.Discuss the character of the income and losses generated by these activities.

Accepted Answer

The answer of During the current year,Ryan performs personal services...

Question 3

What special passive loss treatment is available to real estate activities?

Accepted Answer

The answer of What special passive loss treatment is available...

Question 4

Vail owns interests in a beauty salon,a natural foods store,and a tanning salon.Several full-time employees work at each of the enterprises.As of the end of November of the current year,Vail has worked 180 hours in the beauty salon,220 hours at the natural foods store,and 80 hours at the tanning salon.These three ventures collectively will produce income.Vail also owns one other passive activity that is producing a loss (a limited partnership in which she has reported no participation).How should Vail plan her activities for the remainder of the year?

Accepted Answer

The answer of Vail owns interests in a beauty salon,a...

Question 5

When a taxpayer disposes of a passive activity by gift,what happens to any unused passive losses?

Accepted Answer

The answer of When a taxpayer disposes of a passive...

Question 6

Ken has a $40,000 loss from an investment in a partnership in which he does not materially participate.He paid $30,000 for his interest.How much of the loss is disallowed by the at-risk rules? How much is disallowed by the passive loss rules?

Accepted Answer

The answer of Ken has a $40,000 loss from an...

Question 7

Samantha invested $75,000 in a passive activity several years ago,and on January 1,2009,her amount at risk was $15,000.Her shares of the income and losses in the activity for the next three years are as follows:
  How much can Samantha deduct in 2009 and 2010? What is her taxable income from the activity in 2011? (Consider both the at-risk rules as well as the passive loss rules. )

Accepted Answer

The answer of Samantha invested $75,000 in a passive activity...

Question 8

Purple Corporation,a personal service corporation,earns active income of $600,000.The corporation receives $60,000 in dividends and incurs a loss of $100,000 from an investment in a passive activity acquired three years ago.What is Purple's income after considering the passive investment?

Accepted Answer

The answer of Purple Corporation,a personal service corporation,earns active income...

Question 9

Orange Corporation,a closely held (non-personal service)C corporation,earns active income of $300,000 in the current year.The corporation also receives $35,000 in dividends during the year.In addition,Orange incurs a loss of $50,000 from an investment in a passive activity.What is Orange's income for the year after considering the passive investment?

Accepted Answer

The answer of Orange Corporation,a closely held (non-personal service)C corporation,earns...

Question 10

Pat sells a passive activity for $100,000 that has an adjusted basis of $55,000.During the years of her ownership,$60,000 of losses have been incurred that were suspended under the passive activity loss rules.In addition,the passive activity generated tax credits of $10,000 that were not utilized and suspended.Determine the tax treatment to Pat on the disposition of the property.

Accepted Answer

The answer of Pat sells a passive activity for $100,000...

Question 11

Barb borrowed $100,000 to acquire a parcel of land to be held for investment purposes and paid interest of $11,000 on the loan.She has AGI of $75,000 for the year.Other items related to Barb's investments include the following:
  Barb is unmarried and elects to itemize her deductions.She has no miscellaneous itemized deductions other than the investment counsel fees.

Accepted Answer

The answer of Barb borrowed $100,000 to acquire a parcel...

Question 12

Faye dies owning an interest in a passive activity property (adjusted basis of $150,000,suspended losses of $52,000,and a fair market value of $180,000).What,if any,can be deducted on her final income tax return?

Accepted Answer

The answer of Faye dies owning an interest in a...

Question 13

Identify how the passive loss rules broadly classify various types of income and losses.Provide examples of each category.

Accepted Answer

The answer of Identify how the passive loss rules broadly...

Question 14

List the taxpayers that are subject to the passive loss rules and summarize the general impact of these rules on these taxpayers.

Accepted Answer

The answer of List the taxpayers that are subject to...

Quiz 11: Investor Losses