Josh has investments in two passive activities. Activity A, acquired three years ago, produces income in the current year of $60,000. Activity B, acquired last year, produces a loss of $100,000 in the current year. At the beginning of this year, Josh's at-risk amounts in Activities A and B are $10,000 and $100,000, respectively. What is the amount of Josh's suspended passive activity loss with respect to these activities at the end of the current year?
A) $0
B) $36,000
C) $40,000
D) $100,000
E) None of the above

Question

Quizplus · Accepted Answer

In this case, the passive activity loss from Activity B is greater than the at-risk amount ($100,000 > $100,000), so $100,000 of the loss is disallowed and suspended. The passive activity gain from Activity A is $60,000, which is less than the at-risk amount of $10,000, so none of the gain is disallowed or suspended. Therefore, the total suspended passive activity loss is $100,000.

Josh Has Investments in Two Passive Activities