Question

Discuss the treatment given to suspended passive activity losses and credits. What happens to an activity’s...

Discuss the treatment given to suspended passive activity losses and credits. What happens to an activity’s unused losses and credits when the activity is sold?

Homework Answers

Answer #1

Answer :-

In general, passive losses are deductible to the extent of passive income from all of the taxpayer’s current-year passive activities. Passive credits can be utilized only against regular tax attributable to passive income. If passive losses or credits are not used in the current year, they are carried over indefinitely for potential use in the succeeding years to offset passive income (or regular tax attributable to passive income) in those years.

.

An activity’s unused (or suspended) passive losses that exist when a taxpayer sells the passive activity may be used to reduce the gain from the sale, or increase the recognized loss. Thus, the suspended passive losses are fully utilized in the year of disposition. In contrast, passive credits are allowed on dispositions only when there is sufficient tax on passive income to absorb them.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Leon sells his interest in a passive activity for $224,000. Determine the tax effect of the...
Leon sells his interest in a passive activity for $224,000. Determine the tax effect of the sale based on each of the following independent facts: If an amount is zero, enter "0". a. Adjusted basis in this investment is $78,400. Losses from prior years that were not deductible due to the passive activity loss restrictions total $86,240. The (taxable gain/ or Deductible Loss) is $. The suspended losses at the end of the year are $. Feedback When a taxpayer...
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?
The concept of passive activity loss limitations including: 1. Why were the passive loss rules enacted?...
The concept of passive activity loss limitations including: 1. Why were the passive loss rules enacted? What problem were they trying to solve? 2. To whom do the passive loss rules apply and what makes an activity passive or not passive? 3. What is the treatment of losses that are not allowed to be deducted in the current year? 4. How does material participation (or lack thereof) affect passive activity loss deductions? How is material participation achieved?
Detail and discuss what happens when the quality of medical care rises. In addition, detail and...
Detail and discuss what happens when the quality of medical care rises. In addition, detail and discuss what happens when the increase in the quality of medical care is unobservable to the consumer (like a reduction in the probability of an adverse reaction to treatment).
Discuss what happens to the equilibrium price and quantity of Colgate Toothpaste when there is a...
Discuss what happens to the equilibrium price and quantity of Colgate Toothpaste when there is a decrease in the supply of Colgate Toothpaste but no change in the demand. What could cause a decrease in the supply of Colgate Toothpaste but no change in demand?
1)     Discuss what you think happens when someone loses some sensory capacity (for example, sight). Do the...
1)     Discuss what you think happens when someone loses some sensory capacity (for example, sight). Do the brain's other sensory systems become more acute? If so, what could be the possible mechanisms?
Discuss what happens when strings are concatenated together within the computer's memory. Describe any ideas on...
Discuss what happens when strings are concatenated together within the computer's memory. Describe any ideas on how to make the concatenation process as fast as possible considering the immutability of strings. this is for fundamentalls of programming and logic and current topics are arround python programing I need help answering these questions as we have no text books.
14. Jim, single, took out a mortgage on his home for $590,000 five years ago. In...
14. Jim, single, took out a mortgage on his home for $590,000 five years ago. In September of this year, when the home had a fair market value of $620,000 and he owed $550,000 on the mortgage, he took out a home equity loan for $80,000. Will used the funds to purchase a yacht to be used for recreational purposes. What is the maximum amount of debt on which he can deduct home equity interest? a. $70,000. b. $80,000. c....
Financial Reporting and Analysis Assignment #1 Q1. What is IFRS? ? What is the IASB? ?...
Financial Reporting and Analysis Assignment #1 Q1. What is IFRS? ? What is the IASB? ? How widespread is the adoption of IFRS around the world? ? What is the possibility of the Securities and Exchange Commission substituting IFRS for GAAP? ? What are the advantages of converting to IFRS? ? What could be the disadvantages of converting to IFRS? ? What is the difference between convergence and adoption? ? When comparing IFRS and GAAP, what are some overall key...
Discuss ethical issues that can be identified in this case and the mode of managing ethics...
Discuss ethical issues that can be identified in this case and the mode of managing ethics Enron finds itself in this case. How would you describe the ethical culture and levels of trust at Enron? Provide reasons for your assessment. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among...