eon sells his interest in a passive activity for $204,500. Determine the tax eff
ID: 2565907 • Letter: E
Question
eon sells his interest in a passive activity for $204,500. Determine the tax effect of the sale based on each of the following independent facts:
a. Adjusted basis in this investment is $71,575. Losses from prior years that were not deductible due to the passive activity loss restrictions total $78,733.
The suspended losses at the end of the year are .....
b. Assume the same sales price but the adjusted basis in this investment is $153,375. Losses from prior years that were not deductible due to the passive activity loss restrictions total $78,733.
The suspended losses at the end of the year are...
c. Assume the same sales price but the adjusted basis in this investment is $153,375. Losses from prior years that were not deductible due to the passive activity loss restrictions total $78,733. In addition, suspended credits total $20,450.
The suspended losses at the end of the year are ...
The suspended credits at the end of the year are ...
Explanation / Answer
a) Tax effect of sale (Amount in $)
There is a taxable income of $54,192 (i.e. gain) after set off of prior year losses. There is no suspended losses at the end of year
b) Tax effect of sale (Amount in $)
There is a deductible loss of $27,608.
c) Tax effect of sale (Amount in $)
The deductible losses at the end of year will be $7,158. There is no Suspended Credits at the end of Year (i.e 0)
Sale Price 204,500 Less:- Adjusted Basis (71,575) Total gain 132,925 Less :- Suspended Losses (78,733) Taxable gain (Passive) 54,192Related Questions
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