Josh has investments in two passive activities. Activity A (acquired three years ago) produces income of $30,000 this year, while Activity B (acquired two years ago) produces a loss of $50,000. What is the amount of Josh's suspended loss for the year?
A) $0
B) $18,000
C) $20,000
D) $50,000
E) None of the above

Question

Quizplus · Accepted Answer

To calculate the suspended loss, we need to compare the income and losses from the passive activities. In this case, the income from Activity A cannot offset the losses from Activity B because they were acquired in different years. Therefore, we need to calculate the net loss from Activity B, which is $50,000. However, we can only deduct up to $25,000 of passive losses against non-passive income. Therefore, the remaining $25,000 is suspended and carried forward to future years. So, the suspended loss for the year is $25,000 for Activity B, and since there is no suspended income from Activity A, the total suspended loss for the year is $25,000. 
Thus, the best choice is C, $20,000.

Josh Has Investments in Two Passive Activities