Question

Art's at-risk amount in a passive activity was $60,000 at the beginning of 2015. His loss from the activity in 2015 is $80,000, and he had no passive activity income during the year. Art had $20,000 of passive activity income from the activity in 2016. Under the passive activity loss rules, Art's suspended loss at the end of 2016 is:

a. $15,000.
b. $20,000.
c. $45,000.
d. $60,000.
e. None of the above.

Answer 1

d. $60,000

Step-by-step explanation:

As per passive income rules, As stated under Internal Revenue Service is a kind of statement that allows to set off the passive loss as against passive income only.

There is no rule which permits to set it off against ordinary income.

Therefore, the details in the given instance are:

Loss of 2015 = ($80,000)

Income in 2016 = $20,000

Loss at the end of 2016 = ($60,000)

This because from the income in 2016 amounting $20,000 the loss of $20,000 is set off.