Question

Nell earns $50,000 salary income in the current year. In addition, Nell sells a passive activity with an adjusted basis of $45,000 for $155,000 in the current year. Suspended losses attributable to this property total $45,000. Nell owns another separate passive activity which has $10,000 passive loss for the current year and $80,000 suspended passive losses from prior years. Nell will report the following on her current year income tax return (as a result of just these transactions): a. $$50,000 salary income and an additional $110,000 from the sale of the passive activity b. $25,000 salary income and $0 additional taxable income (because all $110,000 gain from the sale of the passive activity offset by losses and an additional $25,000 of passive loss is available to deduct against the salary income. c. $50,000 salary income and $0 additional taxable income (because all $110,000 gain from the sale of the passive activity is offset by losses). d. $50,000 salary income and an

Answer 1

Income from passive activities

= 155,000-45,000-45,000-10,000-80,000

= -$25,000

Passive loss are allowed only upto the extend of grains from passive activities, so 25,000 will be carried forward.

So d option 50,000$ salary income.

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