Sarah has investments in four passive activity partnerships purchased several ye

Question

Sarah has investments in four passive activity partnerships purchased several years ago. Last year, the income and losses were as follows:

Activity A $10,000

Activity B (5,000)

Activity C (25,000)

Activity D ($20,000)

In the current year, Sarah sold her interest in Activity D for a $19,000 gain, Activity D, which had been profitable untill last year, had a current loss of $1000. How will the slae of Activity D affect Sarah's taxable income in the current year?

The net gain form the sale of Activity D(before any passive losses form the other activities)is _______.

How much, if any, of this net gain may be used to absorb passive losses from other activities? ______.

Explanation / Answer

taxable income decreases asot occured loss of $1000 The amount of suspended losses carried forward to the year of the sale = =2000-19000 =$1000 amount of the suspended losses is allocated to Acitivity D = 1000+1000 =$2000

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