Question

Matt has three passive activities and has at-risk amounts in excess of $100,000 for each. During the year, the activities produced the following income (losses). Activity A ($60,000) Activity B (40,000) Activity C 75,000 Net passive activity loss ($25,000) Matt's suspended losses are as follows:_______.
a. $25,000 is allocated to C; $0 to A and B.
b. $8,333 is allocated to A, B, and C.
c. $12,500 is allocated to A; $12,500 to B.
d. $15,000 is allocated to A; $10,0.

Answer 1

Answer:

d. $15,000 is allocated to A; $10,000 is allocated to B

Explanation:

Activity C will not carry and suspended losses as it was profitable, the net of 25,000 will be distributed among the lossing activites:

60,000+ 40,000 = 100,000 loss

activity A weight 60%

activity B weight 40%

net loss: 25,000

activity A 25,000 x 60% = 15,000

activity B 25,000 x 40% = 10,000