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?
A) $52,000.
B) $30,000.
C) $22,000.
D) $0.
E) None of the above.

Question

Quizplus · Accepted Answer

When a person dies, any suspended passive activity losses can be deducted from the rental real estate activities that the decedent performed before death, up to $25,000 ($12,500 for married filing separately) in the final year. In this situation, Faye can deduct $22,000 ($25,000 limit minus $3,000 final year loss) of the suspended passive activity losses on her final income tax return. The remaining $30,000 of loss would be permanently lost as it cannot be transferred to her heirs.

Faye Dies Owning an Interest in a Passive Activity Property