19. If interest expense of $10,000 is paid on borrowings that were acquired for the purpose of obtaining taxable investments (All of the taxpayer’s taxable investments currently produce $8,300 of taxable income.), the taxpayer may deduct the full amount of the interest as an itemized deduction.
20. A taxpayer invests $10,000 in a partnership. The taxpayer is further responsible for $10,000 of partnership loans. The partner’s share of partnership losses for the first three years is $26,000. The lossesare fully deductible as long as the taxpayer materially participates in the partnership business for all three years.
21. Fred incurs a loss of $15,000 on his rental office building which he actively manages. Fred’s AGI (without considering the rental loss) is $200,000. Fred will be able to deduct this loss under the special allowance from the passive loss rules for rental real estate with active participation.
22. A taxpayer owns Activity A which produces income and Activity B which produces passive loss. Thetaxpayer will be better off from a tax savings perspective if Activity A is classified as a passive activity.
23. A nonbusiness casualty and theft loss is subject to a reduction of $100 per casualty and the total of such losses is subject to an additional floor of 10% of adjusted gross income. Business casualty losses do not have these limitations.
24. Deductible residence interest includes only interest attributable to the mortgage on the taxpayer’s principal residence.