Question

Marshall sells his entire interest in a passive activity for $350,000 on the installment method. His...

Marshall sells his entire interest in a passive activity for $350,000 on the installment method. His adjusted basis in the property is $280,000. The activity has a suspended loss of $40,000. In your computations, round any division to three decimal places.

If Marshall receives a $80,000 down payment, he will recognize a gain of $ and Marshall will deduct
$ of the suspended losses in the first year of the sale.

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Answer #1

Sales of interest

         350,000

Less: adjusted Basis of property

         280,000

Total gain

           70,000

Gross Profit ratio (70000/350000)

20.00%

Cash received from down payment

           80,000

Multiply by : Gross Profit ratio

20.00%

Gain recognized this year

           16,000

suspended loss

           40,000

Multiply by : Gain recognized to Total gain (16000/70000)

22.8571%

Current Deductible loss

             9,143
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