Jessica reports the following income and loss: Salary $100,000 Loss from Activit

Question

Jessica reports the following income and loss:

            Salary                                                  $100,000

Loss from Activity A                          (50,000)

Income from Activity B                     30,000

Loss from Activity C                          (25,000)

Activities A, B and C are all passive activities. What is the amount of the suspended loss attributable to each activity?

(Points : 5)        A $0; B $0; C $0
       A $30,000; B $0; C $15,000
       A $0; B $45,000; C $0
       A $20,000; B $0; C $25,000
       A $35,000; B $0; C $10,000
       A $20,000; B $0; C $10,000
       A $50,000; B $30,000; C $25,000

Explanation / Answer

Income from salary $ 100000

Passive activity

Loss from activity A = $(50000)

Income from Activity B =$ 30000

Loss from Acitivity C = $(25000)

Net Passive Loss = Sum of All Passive Income – Sum of All Passive Losses

Carryover Losses for Activity = Net Passive Loss × Loss from Activity ÷ Sum of All Losses from Activities That Had Losses for the Taxable Year

Net loss = $ (75000)+$30000

=$ (45000)

Suspended Loss A = ($45000*$50000)/($75000)

= $30000

Suspended loss B = 0

Suspended loss from activity c = ( $45000*$25000)/$75000

= $ 15000

Suspended loss from activity A= $ 30000

Suspended loss from activity B= 0

Suspended loss from activity A= $ 15000

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