Five years ago Gerald invested $172,000 in a passive activity, his sole investment venture. On January 1, 2016, his amount at risk in the activity was $34,400. His shares of the income and losses were as follows:
2016: ($51,600)
2017: ($34,000)
2018: $54,400
Gerald holds no suspended at risk or passive activity losses at the beginning of 2016.
a. If losses were limited ONLY by the at-risk rules, how much can Gerald deduct in 2016 and 2017?
b. Refer to the information in part (a) above. Assuming Gerald has 54,400 income in 2018, what is his taxable income from the activity in 2018 under at-risk rules?
c. if losses were limited by the at-risk AND passive activity loss rules, how much would Gerald be able to deduct in 2016 and 2017?
d. Assuming Gerald has $54,400 income in 2018, (and considering both at-risk and passive activity loss rules), what is the amount of Gerald's suspended passive activity losses at the end of 2018?
e. At the end of 2018, what is the amount of Gerald's adjusted basis in the activity?