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Exam 6: Losses and Loss Limitations

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Question 101

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In 2017, Kelly earns a salary of $200,000 and invests $40,000 for a 20% interest in a partnership not subject to the passive activity loss rules.Through the use of $800,000 of nonrecourse financing, the partnership acquires assets worth $1 million.The activity produces a loss of $150,000, of which Kelly's share is $30,000.In 2018, Kelly's share of the loss from the partnership is $15,000.How much of the loss from the partnership can Kelly deduct?

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Kelly has $40,000 at risk at the end of ...

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Question 102

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Lindsey, an attorney, earns $125,000 from her law practice in the current year.In addition, she receives $50,000 in dividends and interest during the year.Further, she incurs a loss of $40,000 from an investment in a passive activity.What is Lindsey's AGI for the year after considering the passive investment?

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Lindsey cannot deduct the passive activi...

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Question 103

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While Susan was on vacation during the current year, someone broke into her home and stole the following items: ∙ A computer used 60% in connection with Susan's employment as an employee and 40% for her personal use.The cost of the computer was $8,000.Depreciation of $3,000 had been taken on the computer and it had a fair market value of $4,000 at the time of the theft. ∙ A painting, which Susan purchased as an investment for $10,000, had a fair market value of $17,000. ∙ Silverware purchased for $3,000 had a fair market value of $5,000. ∙ Cash of $30,000. Susan's adjusted gross income, before considering any of the above items, is $60,000.Determine the total amount of Susan's itemized deductions resulting from the theft.

In 2017, Amos had AGI of $50,000.Amos also had a diamond ring stolen which cost $20,000 and was worth $17,000 at the time of the theft.He itemized deductions on last year's tax return.In 2018, Amos recovered $17,000 from the insurance company.Therefore, he must include $11,900 in gross income on the tax return for the current year.

Identify how the passive activity loss rules broadly classify various types of income and losses.Provide examples of each category.