Question

Five years ago Gerald invested $116,000 in a passive activity, his sole investment venture. On January 1, 2019, his amount at risk in the activity was $23,200. His shares of the income and losses were as follows:

Year Income (Loss) 2019 ($34,800) 2020 (23,200) 2021 43,200

Gerald holds no suspended at-risk or passive activity losses at the beginning of 2019.

If an answer is zero, enter "0".

c. Assuming Gerald has $50,000 income in 2021, (and considering both at-risk and passive activity loss rules), what is the amount of Gerald's suspended losses at the end of 2021?

• Suspended under the at-risk rules: $
• Suspended under the passive activity loss rules: $

What is his taxable income for 2021? $
At the end of 2021, what is the amount of Gerald's adjusted basis in the activity? $

Answer 1

C)

Assuming Gerald has $50,000 income in 2021, (and considering both at-risk and passive activity loss rules), what is the amount of Gerald's suspended losses at the end of 2021?

(1) Suspended under the at-risk rules: $0

(2) Suspended under the passive activity loss rules: $20,000

(3) What is his taxable income for 2021 : $11,600

(4) At the end of 2021, what is the amount of Gerald's adjusted basis in the activity? : $15,200

Note :-(1) Of the allowable at-risk loss for 2019, Gerald may deduct $0 in 2019 due to the passive loss rules and of the allowable at-risk loss from 2020, Gerald may deduct $0 in 2020 due to the passive loss rules.

As per risk rule , mentioned in the Question - amount to $ 23200 so any amount more than $ 23200, deduction or adjusted ( set off) available

Year	Income /(Loss) $	Allowed Limit (Risk) $	Disallow
2019	(34800)	23200	11600	($ 34800-23200)
2020	(23200)	0	23200	($ 23200 -0)
2021	43200

Total

34800

Note - Assuming Gerald has $ 50000 Income in 2021 i considering both at Risk and passive activity loss rule

		Amount ($)
(2)	Income ( passive )	43200
	Passive Active Limit	(23200)
	Suspended under the passive active loss rule	20000
(4)	Income ( passive )	50000
	Less
	Total losses disallow as calculated above	(34800)
	Adjusted Income	15200