Question

Ramirez's adjusted basis in a passive activity is $45,000 at the beginning of the year. His loss from the activity for the current year is $14,200. Ramirez has wages of $65,000 and dividend income of $300. At year-end, Ramirez has the following:
1. Adjusted basis in the passive activity: $______
2. At-risk amount in the passive activity: $________
3. A suspended passive loss: $_______

Answer 1

Answer:

1. $30,800

2. $30,800

3. $14,200

Explanation:

1. Calculation to determine the Adjusted basis in the passive activity

Using this formula

Adjusted basis in the passive activity=Beginning adjusted basis in a passive activity-Loss activity for the current year

Adjusted basis in the passive activity=$45,000-$14,200

Adjusted basis in the passive activity=$30,800

Therefore Adjusted basis in the passive activity is $30,800

2. Calculation to determine At-risk amount in the passive activity

Using this formula

At-risk amount=Beginning adjusted basis in a passive activity-Loss activity for the current year

Let plug in the formula

At-risk amount=$45,000-$14,200

At-risk amount=$30,800

Therefore At-risk amount in the passive activity is $30,800

3. Based on the information given we were told that His loss amount from the activity for the current year was the amount of $14,200 which means that the suspended PASSIVE LOSS will be $14,200.