Question

Question 7
Which of the following is not a passive activity?

1) Owning a working interest in oil and gas wells.

2) Owning a business and not materially participating.

3) Owning a limited partnership interest in oil and gas wells.

4) Owning a limited partnership interest in real estate.

Question 8
Billy Ray owns several parcels of rental real estate, and he actively participates in managing the properties. His total loss from these activities in 2019 is $30,000 and his AGI for 2019 is $110,000. How much of the disallowed loss from rental real estate activities may be carried over to future years?

1) 0%

2) 10%

3) 50%

4) 100%

Answer 1

Passive activity is activity that a tax payer did not materially participate in during the tax year.

1. Trade or business activities to which tax payer does not actively contribute

2.Rental activities

Q. 1 Hence owning interst in oil and gas wells is not a passive activity - option a

Q. 2 renting real estate activities is a passive activity even though you have materially participated.

If the AGI is less than $100,000 then $25,000 loss is allowed and if the AGI is between $100,000 and $150,000 deduction is phased out.

As the AGI is between the limit above the deduction is phased out and 50% of the disallowed loss will be carried forward for the future years