Question

1.    Grady holds interests in three passive activities during 2018. The operation summaries are listed below:

Passive Activity:	A	B	C	Total
Gross Income	$9,000	$4,000	$12,000	$25,000
Deductions	($16,000)	($22,000)	($8,000)	($46,000)
Net Income (Loss)	($7,000)	($18,000)	$4,000	($21,000)

                  Given the information above, what is Grady’s disallowed passive activity loss and what is the disallowed portion of each loss?

Answer 1

Hey there !!

Let me help you with this question..

Here we have to clculate disallowed passive activity loss and disallowed portion of each loss..

As per IRS Rules, the losses from passive activities that exceed the income from passive activities are disallowed for the current year. The same can be carried forward the next taxable year.

So let us calculate the loss to be disallowed or carried forward..

Passive Activity:	A	B	C	Total
Gross Income	$9,000	$4,000	$12,000	$25,000
Deductions	($16,000)	($22,000)	($8,000)	($46,000)
Net Income (Loss)	($7,000)	($18,000)	$4,000	($21,000)
Loss disallowed in current yr to be Carried forward	$7,000	$18,000	0	$25,000

The disallowed portion of each loss will be calculated as follows.
A. $21,000 x $7,000/$25,000	$5,880
B: $21,000 x $18,000/$25,000	$15,120
Total $21,000

I hope the solution is clear to you now...do let me know in case of any concerns....

All the best !!

Happy Studying :)