Question

Sandra acquired a passive activity three years ago. Until last year, the activity was profitable, and her at-risk amount was $300,000. 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 activity income in the current or prior years, her suspended passive activity losses from the activity are: a. $90,000 from last year and $50,000 from the current year. b. $100,000 from last year and $50,000 from the current year. c. $0 from last year and $0 from the current year. d. $50,000 from the current year.

Answer 1

c. $0 from last year and $0 from the current year.

Step-by-step explanation:

$300,000 - $100,000 = $200,000 new at risk basis at the end of last year

at risk basis at the end of current year = at risk basis at the end of last year - current year's loss = $200,000 - $50,000 = $150,000

since at risk basis is still $150,000 (not negative), there is no suspended passive activity loss