Should Jorge close the sale of Activity A

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Problem - Decision Making, Jorge owns two passive investments, Activity A and Activity B. He plans to sell Activity A in the current year or next year. Juanita has offered to buy Activity A this year for an amount that would produce a taxable passive activity gain to Jorge of $115,000. However, if the sale, for whatever reason, is not made to Juanita, Jorge believes that he could find a buyer who would pay about $7,000 less than Juanita. Passive activity losses and gains generated (and expected to be generated) by Activity B follow:

Two years ago ($35,000)

Last year (35,000)

This year (8,000)

Next year (30,000)

Future years Minimal profits

All of Activity B's losses are suspended. Should Jorge close the sale of Activity A with Juanita this year, or should he wait until next year and sell to another buyer? Jorge is in the 32% tax bracket.

Reference no: EM132668387

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