Leon sells his interest in a passive activity for $100,000. Determined the tax e

Question

Leon sells his interest in a passive activity for $100,000. Determined the tax effect of the sale based on each of the following independent facts:


Adjusted basis in this investment is $75,000. Losses from prior years that were not deductible due to the passive loss restrictions total $ 40,000. In addition, suspended credits total $10,000.


The (deductible loss, taxable gain) is __________.


The suspended losses at the end of the year are ___________.


The suspended credits at the end of the year are ___________.

Explanation / Answer

deductible loss, taxable gain = 100000 - 75000= $25000 suspended loss = 100000- 40000 = $60000 suspended credit at end = 10000+60000 = $70000

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