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20111006 Chat Th Cpt 7 & 8

20111006 Chat Th Cpt 7 & 8 - Chapter 7 Deductions...

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Chapter 7 Deductions: Business/Investment Losses and Passive Activity Losses Tax Problem Comprehensive Problem 11-57 due mid-4th week At-Risk Rules: Passive Losses and Suspended Losses cranes P7-36 36 7215 senarc a. Amount at risk: Zero Cash contributed $25,000 $25,000 Less: loss (25,000) $(25,000) $0 $- The nonrecourse note for the acquisition of real property was fi nanced by the seller. Thus, the partners are not considered at risk for the note even though it was issued by a fi nancial institution. b. Passive loss deduction: None The amount of passive loss for which Jackson is at risk ($25,000) would be offset by an equal amount of passive income. (In addition, the activity was acquired after 1986.) Jackson would have net passive income of $10,000 ($35,000 − $25,000). c. Suspended loss: $20,000 The remaining $20,000 of the allocated loss would be suspended under the at-risk rules. black,s law dictionary WG&L Tax Dictionary p7-38 7215 Passive Losses: Deduction—Suspended Losses 38 ???? a. Net Loss: Selling price of A-1 $15,000 $15,000 Less: Basis 11,000 $(11,000) Realized gain $4,000 $4,000 Net income of A-1 14,000 $14,000 Total income from A-1 $18,000 $18,000 Less: Suspended loss ( 27,000 ) $(27,000) Net passive loss from A-1 (deductible against nonpassive income) $( 9,000 ) $(9,000) 2010 Passive Losses: Pre-enactment Post-enactment Activities Activities A-1 $0 $- B-2 ( 22,000 ) $(22,000) C-3 ( $5,000 ) $(5,000) D-4 ( 3,000 ) $(3,000) Net ( $22,000 ) ( $8,000 ) $(22,000) $(8,000) b. Passive Loss Deduction: Lesser of net loss of pre-enactment losses or net loss from all passive activities ( $22,000 ) Passive Loss Deduction (ordinary) $0 c. Suspended Losses: Total losses before deduction ( $30,000 ) Less: Passive loss deduction 0 Suspended Loss ( $30,000 ) Allocation Allocated Suspended Loss B-2 $22,000/$30,000 × $30,000 $22,000 C-3 $ 5,000/$30,000 × $30,000 $5,000 D-4 $ 3,000/$30,000 × $30,000 $3,000 P7-45 p7-45 7215 7235 Passive Losses: Material Participation—Suspended Losses 45. Ms. Parker did not materially participate in the movie theater for 2006, 2007, 2008, and 2009, but she did materially participate in 2010. During these four years of operations, the activity experienced a $58,000 loss, which was entirely suspended: Loss Year Loss Phaseout% Deduction Suspended 2006 21000 0 0 21000 2007 6000 0 0 6000 2008 19000 0 0 19000 2009 12000 0 0 12000 Total loss suspended 58000 Therefore, $24,000 of suspended losses will offset the $24,000 net income from the theater, and the balance ($34,000) will be available to offset future net income from the theater and from other activities that are passive. Portfolio income cannot be offset by the suspended loss. P7-60 p7-60 p7-61 7301 P7-61 Casualty Loss 60. Adjusted Basis of $65,000 less scrap value of $200 yields a deductible casualty loss of $64,800. 61. John’s loss is limited to $46,500 (the decrease in the fair market value since that amount is less than the fmv bf 50000 adjusted basis of the property). fmv af -3500 46500 Break 7:21 10 minutes Chapter 8 Robert Half Deductions: Itemized Deductions Schedule A P8-24 p8-24 8001 Medical Expenses: Nondependent Parent 24. Oliver is able to claim the medical expenses paid for his father. The gross income dependency test is waived for the medical expense deduction.
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