Problem 1: Carmen, a single taxpayer, has $80,000 in salary, $10,000 in income from a limited partnership, and a $30,000 passive loss from a real estate rental activity in which she actively participates. Her modified adjusted gross income is $80,000. Of the $30,000 loss, Carmen may deduct:
a. $0.
b. $10,000.
c. $25,000.
d. $30,000.
e. Some other amount.
Problem 2: Roxanne, who is single, has $125,000 of salary, $10,000 of income from a limited partnership, and a $26,000 passive loss from a real estate rental activity in which she actively participates. Her modified adjusted gross income is $125,000. Of the $26,000 loss, how much is deductible?
a. $0.
b. $10,000.
c. $25,000.
d. $26,000.
e. None of the above.
Problem 3: Lucy dies owning a passive activity with an adjusted basis of $90,000. Its fair market value at that date is $145,000. Suspended losses relating to the property were $75,000. Which of the following statements is true?
a. The heir's adjusted basis is $145,000, and Lucy's final deduction is $20,000.
b. The heir's adjusted basis is $145,000, and Lucy's final deduction is $75,000.
c. The heir's adjusted basis is $90,000, and Lucy's final deduction is $75,000.
d. The heir's adjusted basis is $220,000, and Lucy has no final deduction.
e. None of the above.
Problem 4: Kim made a gift to Sam of a passive activity (adjusted basis of $50,000, suspended losses of $20,000, and a fair market value of $80,000). No gift tax resulted from the transfer. Which of the following statements is true?
a. Sam's adjusted basis is $80,000.
b. Sam's adjusted basis is $50,000, and Sam can deduct the $20,000 of suspended losses in the future.
c. Sam's adjusted basis is $80,000, and Sam can deduct the $20,000 of suspended losses in the future.
d. Sam's adjusted basis is $50,000, and the suspended losses are lost.
e. None of the above.
Problem 5: Identify from the list below the type of disposition of a passive activity where the taxpayer keeps the suspended losses of the disposed activity and utilizes them on a subsequent taxable disposition.
a. Disposition of a passive activity by gift.
b. Nontaxable exchange of a passive activity.
c. Disposition of a passive activity at death.
d. Installment sale of a passive activity.
e. None of the above.