Question

In: Accounting

Alfonso sells a passive activity in the current year for $800,000. His adjusted basis in the...

Alfonso sells a passive activity in the current year for $800,000. His adjusted basis in the activity is $200,000, and he uses the installment method of reporting the gain. The activity has suspended losses of $44,000. Alfonso receives $400,000 in the year of sale.

Enter as a percentage. For example, .35 would be entered as "35". %

a. What is his gross profit ratio on the sale? _________________%      

b. His recognized gain for the current year is $. ____________________

c. Alfonso can currently deduct $______________________ of suspended losses.

Solutions

Expert Solution

Given:

a) Sale of passive activity = $800,000

Adjusted basis = $200,000

Profit = 800,000 – 200,000

= $600,000

Gross profit ratio = Gross Profit / Sales

= 600,000 / 800,000

= 0.75 or 75%

Therefore, Gross profit ratio on sale is 75%

b) Recognized gain for the year = Amount received in the year of sale * gross profit ratio

Amount received in the year of sale = $400,000

Recognized gain = 400,000 * 0.75

= $300,000

Therefore, recognized gain is $300,000

c) Suspended losses deduction for the year:

Therefore, $22,000 of suspended losses can be deducted in the current year.

Suspended loss for the year Suspended loss deduction percent Gross profit 44,000 / 600,000 = 0.073333 or 7.3333% Suspended loss deduction = Recognized gain x Deduction percent = 300,000x 0.073333 = $21,999.9 or $22.000

ekkarill92 answered 5 months ago
Next > < Previous

Related Solutions

In the current year, John’s accounting office was partially destroyed by fire. His adjusted basis in...
In the current year, John’s accounting office was partially destroyed by fire. His adjusted basis in the building was $300,000 and the decline in the fair value was $200,000. Insurance proceeds amounted to $160,000. What is John’ basis in the building?
Ben Figgie acquired a passive partnership activity in January of 2013. His at-risk basis at the...
Ben Figgie acquired a passive partnership activity in January of 2013. His at-risk basis at the beginning of 2017 was $65,000. Ben Figgie also owns a rental property that generated income of $15,000 in 2017and $12,000 in 2018. Ben Figgie’s share of income and loss from the partnership activity is: 2017 <$95,000> 2018. 55,000 Complete the following tables. AT RISK RULES ONLY FOR 2017 Deductible under at-risk provisions. ____________________ Adjusted basis at 12/31/17. ____________________ Suspended under at-risk provisions. ____________________ FOR...
Ben Figgie acquired a passive partnership activity in January of 2013. His at-risk basis at the...
Ben Figgie acquired a passive partnership activity in January of 2013. His at-risk basis at the beginning of 2017 was $65,000. Ben Figgie also owns a rental property that generated income of $15,000 in 2017and $12,000 in 2018. Ben Figgie’s share of income and loss from the partnership activity is: 2017 <$95,000> 2018 55,000 Complete the following tables. AT RISK RULES ONLY FOR 2017 Deductible under at-risk provisions ____________________ Adjusted basis at 12/31/17 ____________________ Suspended under at-risk provisions ____________________ FOR...
Juggernaut acquired a passive partnership activity in January of 2015. His at-risk basis at the beginning...
Juggernaut acquired a passive partnership activity in January of 2015. His at-risk basis at the beginning of 2018 was $65,000. Juggernaut also owns a rental property that generated income of $23,000 in 2018 and $19,000 in 2019. Juggernaut’s share of income and loss from the partnership activity is: 2018 <$79,000> 2019 32,000 Complete the following tables. AT RISK RULES ONLY FOR 2018 Deductible under at-risk provisions                             ____________________ Adjusted basis at 12/31/18                                          ____________________ Suspended under at-risk provisions                             ___________________ FOR 2019 Deductible...
Juggernaut acquired a passive partnership activity in January of 2015. His at-risk basis at the beginning...
Juggernaut acquired a passive partnership activity in January of 2015. His at-risk basis at the beginning of 2018 was $65,000. Juggernaut also owns a rental property that generated income of $23,000 in 2018 and $19,000 in 2019. Juggernaut’s share of income and loss from the partnership activity is: 2018 <$79,000> 2019 32,000 Complete the following tables. (apply both at risk and passive rules together) (3 points) FOR 2018 Deductible under at-risk provisions                             ____________________ Adjusted basis at 12/31/18                                          ____________________ Suspended under...
Ben Figgie acquired a passive partnership activity in January of 2013.  His at-risk basis at the beginning...
Ben Figgie acquired a passive partnership activity in January of 2013.  His at-risk basis at the beginning of 2017 was $65,000.  Ben Figgie also owns a rental property that generated income of $15,000 in 2017and $12,000 in 2018.  Ben Figgie’s share of income and loss from the partnership activity is:             2017                            <$95,000>             2018                              55,000 Complete the following tables. AT RISK RULES ONLY FOR 2017 Deductible under at-risk provisions                             ____________________ Adjusted basis at 12/31/17                                           ____________________ Suspended under at-risk provisions                             ____________________ FOR 2018 Deductible under at-risk provisions                             ____________________ Adjusted basis at...
Answer all 1-6 questions and show work; 1. Nell sells a passive activity with an adjusted...
Answer all 1-6 questions and show work; 1. Nell sells a passive activity with an adjusted basis of $45,000 for $105,000. Suspended losses attributable to this property total $45,000. The total gain and the taxable gain are: a. $60,000 total gain; $105,000 taxable gain. b. $10,000 total gain; $15,000 taxable gain. c. $60,000 total gain; $0 taxable gain. d. $60,000 total gain; $15,000 taxable gain. e. None of the above. 2. Matt has three passive activities and has at-risk amounts...
Josh has a 25% capital and profits interest in the calendar-year GDJ Partnership. His adjusted basis...
Josh has a 25% capital and profits interest in the calendar-year GDJ Partnership. His adjusted basis for his partnership interest on October 15 of the current year is $300,000. On that date, the partnership makes a proportionate liquidating distribution of the following assets to Josh. Partnership’s Basis in Asset Asset’s Fair Market Value Cash Inventory $ 70,000 120,000 $ 70,000 150,000 a. Determine Josh’s basis in the inventory and his recognized gain or loss on the liquidating distribution, if any....
1. Sandra acquired a passive activity three years ago. Until last year, the activity was profitable...
1. Sandra acquired a passive activity three years ago. Until last year, the activity was profitable and her at-risk amount was $120,000. Last year, the activity produced a loss of $100,000 and, in the current year, the loss is $50,000. Assuming Sandra has received no passive income in the current or previous year, her suspended loss (under the passive activity loss provisions) as of the end of the current year is: a. $150,000 b. $120,000 c. $30,000 d. $0 e....
Five years ago Gerald invested $116,000 in a passive activity, his sole investment venture. On January...
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...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT