QUESTION 1 Elk is a passive investor in three activities that have been profitable in previous years. The profits and losses for the current year are as follows: Gain/(Loss) ($30,000) Activity A Activity B Activity C Total (S50,000) $20,000 (S60.000) What amount of the suspected loss should Elk allocate to Activity B?
QUESTION 1 Elk is a passive investor in three activities that have been profitable in previous years. The profits and losses for the current year are as follows: Gain/(Loss) ($30,000) Activity A Activity B Activity C Total (S50,000) $20,000 (S60.000) What amount of the suspected loss should Elk allocate to Activity B?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:QUESTION 1
Elk is a passive investor in three activities that have been profitable in previous years. The profits and losses for the current year are as follows:
Gain/(Loss)
Activity A
($30,000)
Activity B
Activity C
(S50,000)
$20.000
Total
($60 000)
What amount of the suspected 1loss should Elk allocate to Activity B?
O a. $18,000
O b. $37,500
O c. $20,000
O d. $22,500
QUESTION 2
At the end of the tax year, Carma Corporation, always an S corporation, made a liquidating distribution of long-term capital gain property to Amy, a 35% shareholder in Carma. The property has a fair market value of $45,000 and
Carma's basis in the property is $25,000. Amy's basis in Carma is $6,000 before the distribution. What is Carma's total gain or loss, and Amy's basis after the liquidating distribution?
O a. Carma's gain is $20,000; Amy's basis is $39,000
O b. Carma's gain is $0; Amy's basis if $39,000
O c. Carma's gain is $20,000; Amy's basis is $19,000
O d. Carma's gain is $20,000; Amy's basis is $0
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