Kim made a gift to Pat of a passive activity with an adjusted basis of $50,000,

Question

Kim made a gift to Pat of a passive activity with an adjusted basis of $50,000, suspended losses of $20,000, and a fair market value of $60,000. Which of the following statements is true? (I Believe the answer is B ! PLEASE EXPLAIN WHY IN WORDS!!!!)

A. Pat’s adjusted basis is $60,000

B. Pat’s adjusted basis is $50,000, and Pat can deduct the $20,000 of suspended losses in the future.

C. Pat’s adjusted basis is $60,000 and $10,000 of suspended losses are lost

D. Pat’s adjusted basis is $70,000.

E. None of the above

Explanation / Answer

The Answer is "D".

D. Pat's Adjusted Basis is $70000

Calculation of Pat's Adjusted basis :-

= $50000 + $20000

= $70000

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