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Ian Mapp sells an entire passive activity property. The property has an adjusted basis of $60,000...

Ian Mapp sells an entire passive activity property. The property has an adjusted basis of $60,000 and suspended losses of $20,000. The sales price is $75,000. What will the tax consequence be in 2019 when Mapp sells the property?

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Answer #1

Ans;

Sales price : $75,000

Property Basis : $60,000

Suspended Losses : $20,000

Suspended losses are those losses which arises as a result of a passive activity loss after setting of income for that year. Suspended losses can be carried forward for indefinite period and can be deducted from the passive income of next years.

Therefore in the current year on sale of property @$15,000 above than its property basis can be deducted completely from carried forward suspended losses. And balance $5,000 of suspended losses will be carried forward for further years.

So Net income after adjustment : $0

Carry forward of suspended loss : $5,000

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