I am having trouble figuring out these last two problems. 48. Hunter has a $38,0
ID: 2436022 • Letter: I
Question
I am having trouble figuring out these last two problems.48. Hunter has a $38,000 loss from an investment in a partnership in which he does not participate. His basis in the interest is $35,000.
a. How much of the loss is disallowed by the at-risk rules.
b. How much of the loss is disallowed by the passive loss rules.
49. Reva gave her daughter a passive activity last year that had an adjusted basis of $75,000. The activity had suspended losses of $35,000 and a fair market value of $120,000. In the current year her daughter realized income of $18,000 from the passive activity. What is the tax effect on Reva and her daughter last year and in the current year?
Explanation / Answer
48. a.) 38K -35K = 3K. The amount that is not covered by basis is the amount that is not at-risk. b.)assuming there are no other sources of passive income, the entire $38K is disallowed this year. 49. Reva gives away her interest in Year 1 would be a gift tax situation that year. Year 2 has no effect on Reva. The daughter takes over the adjusted basis in Year 1, which is the 75K basis plus the 35K passive activity loss. The passive activity becoming a new basis precludes it from ever being used. Therefore, in year 2 the 18K income is income.
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