Five years ago Gerald invested $198,000 in a passive activity, his sole investment venture. On January 1, 2018, his amount at risk in the activity was $39,600. His shares of the income and losses were as follows: Year Income (Loss) 2018 ($59,400) 2019 (39,600) 2020 59,600 Gerald holds no suspended at-risk or passive activity losses at the beginning of 2018. a. If losses were limited only by the at-risk rules, how much can Gerald deduct in 2018 and 2019? Year: 2018 Loss: ($59,400) Deduction allowed - $39,600, Suspended - $19,800 Year: 2019 Loss:($39,600) Deduction allowed - $0, Suspended - $39,600 Total amount suspended $59,600 b. Refer to the information in part (a) above. If losses were limited by the at-risk and the passive activity loss rules, how much would Gerald be able to deduct in 2018 and 2019? c. Assuming Gerald has $59,600 income in 2020, (and considering both at-risk and passive activity loss rules), what is the amount of Gerald's suspended losses at the end of 2020? What is the amount suspended under the at-risk rules? What is the amount suspended under the passive activity loss rules? What is his taxable income for 2020? At the end of 2020, what is the amount of Gerald's adjusted basis in the activity?
Five years ago Gerald invested $198,000 in a passive activity, his sole investment venture. On January 1, 2018, his amount at risk in the activity was $39,600. His shares of the income and losses were as follows:
Year Income (Loss)
2018 ($59,400)
2019 (39,600)
2020 59,600
Gerald holds no suspended at-risk or passive activity losses at the beginning of 2018.
a. If losses were limited only by the at-risk rules, how much can Gerald deduct in 2018 and 2019?
Year: 2018 Loss: ($59,400)
Deduction allowed - $39,600, Suspended - $19,800
Year: 2019 Loss:($39,600)
Deduction allowed - $0, Suspended - $39,600
Total amount suspended $59,600
b. Refer to the information in part (a) above. If losses were limited by the at-risk and the passive activity loss rules, how much would Gerald be able to deduct in 2018 and 2019?
c. Assuming Gerald has $59,600 income in 2020, (and considering both at-risk and passive activity loss rules), what is the amount of Gerald's suspended losses at the end of 2020?
- What is the amount suspended under the at-risk rules?
- What is the amount suspended under the passive activity loss rules?
- What is his taxable income for 2020?
- At the end of 2020, what is the amount of Gerald's adjusted basis in the activity?
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