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How much can Joel deduct

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Q1. Jim invests as a limited partner in XYZ partnership (his only activity) and pays $150,000 for a 10% interest. He receives a K-1, which allocates an $80,000 loss to him. How much of his loss is suspended under the passive activity rules?

a. $0.

b. $8,000.

c. $15,000.

d. $80,000.

Q2. Joel has a 30 percent interest in a general partnership for which he paid $25,000. The partnership loss for the year is $180,000. How much can Joel deduct?

a. $0.

b. $25,000.

c. $54,000.

d. $60,000.

Q3. Sarah is a 10 percent owner in Canine Connection, LLC, a day-care center for dogs. She is also a 15 percent owner in Little Laughter, LLC a successful children's clothing store. She does not materially participate in either business. Her at-risk and loss/income for the current year is as follows:

Canine Connection - At-risk = $175,000; Loss of $275,000

Little Laughter - At-risk = $25,000; Income of $125,000

She also has wage income of $80,000 and capital gain income of $30,000. Which of the following statements is true?

a. The loss suspended because of the at-risk rules is $75,000 and the loss suspended because of the passive activity loss rules is $75,000.

b. The loss suspended because of the at-risk rules is $75,000 and the loss suspended because the passive activity loss rules is $0.

c. The loss suspended because of the at-risk rules is $50,000 and the loss suspended because the passive activity loss rules is $100,000.

d. The loss suspended because of the at-risk rules is $100,000 and the loss suspended because of the passive activity loss rules is $50,000.

Reference no: EM132082695

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