ons ai 1. LO.1,2,3 Identify two rules designed to limit the tax benefits a taxpa

Question

ons ai 1. LO.1,2,3 Identify two rules designed to limit the tax benefits a taxpayer may oh from a tax shelter investment. Describe how these rules reduce or defer recognition of tax losses. LO.2 List some events that increase or decrease an investor's at-risk amount to claim a higher deduction for losses? What at-risk amount 2. 3. LO.2,3 Roberto invested $18,000 in a chicken production operation. Using nonre- course notes, the business purchases $120,000 worth of grain to feed the chickens. If Roberto's share of the expense is $26,000, how much can he deduct? L0.3 Explain the meaning of the terms active income, portfolio income, and pas. L0.3 Carlos owns an interest in an activity that produces a $100,000 loss duringthe Explain. 4. sive activity income year. Would he prefer to have the activity classified as active or

Explanation / Answer

3 ) Investement= $ 18000 Expense = 26000

Roberto can deduct $18,000 materially participated, expense= 26000-18000= $12000

Robert can deduct $0 not materially participated. expense= 26000$.

5)This is a passive loss if they don't materially participate in the profitable activity they become passive activity. Any income generated by a profitable business that could be sheltered by current and suspended passive loss.

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