Question 5. 5. (TCOs 3, 4, 5, and 7) Aileen made a gift to Aretha of a passive a

Question

Question 5. 5. (TCOs 3, 4, 5, and 7) Aileen made a gift to Aretha of a passive activity with an adjusted basis of $40,000, suspended losses of $35,000, and a fair market value of $120,000. Which of the following statements is true? (Points : 5)

       Aretha's adjusted basis is $120,000.
       Aretha's adjusted basis is $40,000 and Aileen can deduct the $35,000 of suspended losses in the future.
       Aretha's adjusted basis is $40,000 and the $35,000 of suspended losses are lost.
       Aretha's adjusted basis is $75,000.
       None of the above

Question 5. 5. (TCOs 3, 4, 5, and 7) Aileen made a gift to Aretha of a passive activity with an adjusted basis of $40,000, suspended losses of $35,000, and a fair market value of $120,000. Which of the following statements is true? (Points : 5)

Explanation / Answer

Answer: Aretha's adjusted basis is $75,000.

Adjusted basis=40000+35000=75000

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