20121206 Chat 4 Th Cpt 7 & 8 - Chapter 7 Deductions...

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Chapter 7Deductions: Business/Investment Losses and180Passive Activity Losses257.2quiz sat or sun 3 hours cannot repeat, once entered must finishAt-Risk Rules: Passive Losses and Suspended LossescranesP7-36367125senarca. Amount at risk: ZeroCash 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 partnersare not considered at risk for the note even though it was issued by a fi nancial institution.b. Passive loss deduction: NoneThe amount of passive loss for which Jackson is at risk ($25,000) would be offset by an equal amountof passive income. (In addition, the activity was acquired after 1986.) Jackson would have net passiveincome of $10,000 ($35,000 − $25,000).c. Suspended loss: $20,000The remaining $20,000 of the allocated loss would be suspended under the at-risk rules.black,s law dictionaryWG&L Tax DictionaryP7-38p7-387215Passive Losses: Deduction—Suspended Losses38a. 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)2011 Passive Losses:Pre-enactmentPost-enactmentActivitiesActivitiesA-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) $0c. Suspended Losses:Total losses before deduction ( $30,000 )$(30,000)Less: Passive loss deduction 00Suspended Loss ( $30,000 )$(30,000)AllocatedAllocationSuspended LossB-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 P7-45p7-4572157235Passive Losses: Material Participation—Suspended LossesMs. Parker did not materially participate in the movie theater for 2008, 2009, 2010, and 2011, but she didmaterially participate in 2012. During these four years of operations, the activity experienced a $58,000 loss,which was entirely suspended:Loss YearLossPhaseout%DeductionSuspended2008210000021000200960000060002010190000019000580002011120000012000-24000Total loss suspended5800034000Therefore, $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 arepassive. Portfolio income cannot be offset by the suspended loss.P7-60p7-60p7-617301P7-61Casualty Loss60. Adjusted Basis of $65,000 less scrap value of $200 yields a deductible casualty loss of $64,800.61. a)John’s loss is limited to $46,500 (the decrease in the fair market value since that amount is less than thefmv bf50000adjusted basis of the property).fmv af-3500b. $65,000. Th e loss is limited to basis ($65,000) which is smaller than the decline in FMV of $70,000.46500Chapter 8Robert HalfDeductions: Itemized DeductionsSchedule AP8-24p8-248001Medical Expenses: Nondependent Parent24. Oliver is able to claim the medical expenses paid for his father. The gross income dependency test is waivedfor the medical expense deduction.

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