Question

margaret died owning a passive investment in which her basis was $25,000. the fair market value of the asset included in her estate was $150,000, and she had $200,000 of suspended passive activity losses associated with the asset at the time of her death. which of the following is the amount of suspended losses that can be deducted on margaret's final tax return? a. $0. b. $25,000. c. $75,000. d. $200,000.

Answer 1

When a taxpayer dies, their suspended passive activity losses become deductible in the year of their death, subject to certain limitations.

In this case, Margaret had $200,000 of suspended passive activity losses associated with the passive investment at the time of her death. The fair market value of the asset included in her estate was $150,000 and her basis in the asset was $25,000. Therefore, the amount of suspended losses that can be deducted on Margaret's final tax return would be limited to the lesser of the fair market value of the asset or her basis in the asset, which is $25,000.

Therefore, the correct answer is (b) $25,000.