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Exam 6: Losses and Loss Limitations

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Question 51

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In the current year, Kelly had a $35,000 loss from a real estate rental activity in which she is a 10% owner. If she is an active participant and if her modified AGI is $100,000, she can deduct $25,000 of the loss.

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Question 52

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In 2015, Emily invests $120,000 in a limited partnership that is not a passive activity. During 2015, her share of the partnership loss is $90,000. In 2016, her share of the partnership loss is $50,000. How much can Emily deduct in 2015 and 2016?

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Although the passive loss rules do not a...

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Question 53

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Art's at-risk amount in a passive activity was $60,000 at the beginning of 2014. His loss from the activity in 2014 is $80,000, and he had no passive activity income during the year. Art had $20,000 of passive income from the activity in 2015. Under the passive loss rules, Art's suspended loss at the end of 2015 is:

During the current year, Ryan performs personal services as follows: 700 hours in his management consulting practice, 650 hours in a real estate development business, and 550 hours in an apartment leasing operation. He expects that losses will be realized from the two real estate ventures while his consulting practice will show a profit. Ryan files a joint return with his wife whose salary is $125,000. Discuss the character and treatment of the income and losses generated by these activities.

The amount of partial worthlessness on a nonbusiness bad debt is deducted in the year partial worthlessness is determined.

If a taxpayer has a net operating loss (NOL) in 2016 of $20,000, of which $8,000 is attributable to a theft of rental use property, the taxpayer may:

In the current year, Don has a $55,000 loss from a business he owns. His at-risk amount at the end of the year, prior to considering the current year loss, is $36,000. He will be allowed to deduct the $55,000 loss this year if he is a material participant in the business.

In 2015, Arnold invests $80,000 for a 20% interest in a partnership in which he is a material participant. The partnership incurs a loss with $100,000 being Arnold's share. Which of the following statements is incorrect?

A loss from a worthless security is always treated as a short-term capital loss.

If a business debt previously deducted as partially worthless becomes totally worthless this year, only the amount not previously deducted can be deducted this year.

A qualified real estate professional is allowed to treat income or loss from any real estate venture as active except for income or loss from a rental activity.

Carl, a physician, earns $200,000 from his medical practice in the current year. He receives $45,000 in dividends and interest during the year as well as $5,000 of income from a passive activity. In addition, he incurs a loss of $50,000 from an investment in a passive activity. What is Carl's AGI for the current year after considering the passive investment?

Jon owns an apartment building in which he is a material participant and a computer consulting business. Of the 2,000 hours he spends on these activities during the year, 55% of the time is spent operating the apartment building and 45% of the time is spent in the computer consulting business.

Jose, single, had the following items for 2016: ​

Jack owns a 10% interest in a partnership (not real estate) in which his at-risk amount is $42,000 at the beginning of the year. During the year, the partnership borrows $80,000 on a nonrecourse note and incurs a loss of $60,000 from operations. Jack's at-risk amount at the end of the year is $44,000.

Individuals can deduct from active or portfolio income losses of up to $25,000 from real estate rental activities in which they actively participate.

From January through November, Vern participated for 420 hours as a salesman in a partnership in which he owns a 50% interest. The partnership has four full-time employees. During December, Vern spends 110 hours cleaning the store and painting the walls in order to meet the material participation standards. Vern qualifies as a material participant.

A bona fide debt cannot arise on a loan between father and son.

Rick, a computer consultant, owns a separate business (not real estate) in which he participates. He has one employee who works part-time in the business.

Chris receives a gift of a passive activity from his father whose basis was $60,000. Suspended losses related to the activity are $18,000. Chris will be allowed to offset the $18,000 suspended losses against future passive income.