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40. Thomas Settleton owned an interest as a general partner in LBO partnership. Settleton was not a material participant in the activity. His basis was $25,000 on the date he gifted the LBO partnership interest to his son, Willard. Suspended losses amounted to $40,000 as of that date. What are the federal income tax consequences of the gift to the son?41. Teri Frazier owned three businesses and rental properties in 2013. During the year, her hair salon business experienced a $32,000 net loss. She participated 200 hours in the hair salon business. All of the salon’s employees worked more than 600 hours for 2013. Her second business was a coin-operated laundry. She did not participate over 100 hours in the laundry operation. It had a net loss of $14,500. The third business was a flower shop, which had net income of $45,000 for 2013. She participated well over 1,000 hours in the flower shop business. None of the activities was located within one-half mile of each other. She also received dividends of $12,000 from her IBM stock, and interest of $14,000 from her AT&T bonds. In addition, Frazier had a net loss of $18,000 from her real estate rentals (where she was an active participant). Compute her adjusted gross income.42. Darian Basemore owned an interest in five businesses in 2013. His level of participation and percentage of ownership in each enterprise is as follows:ActivityHours of ParticipationOwnership PercentageVen-Tale18022%MovERent8817AZ Airlines95033Sadd Books13512Kingdom Autos18525In which activity, if any, will Darian be considered a material participant?43. Janice Hoplin, MD, owned her own medical clinic. She also owned the office building in which the clinic was located. The medical activity generated $125,000 of net income. She managed the building, which had 15 other medical professionals (tenants), from her medical
office. The office rental activity provided her with a $12,000 net loss for the year. What is Janice’s adjusted gross income?44. Dave Eichoff had adjusted gross income for 2013 of $122,000 before any passive losses or other rental activities. He owned a mountain cabin in Idaho, which he rented for 125 days and which was not used by him at all during the year. The property will experience a net loss of $12,500. He also had a limited partnership interest that was purchased in 1985 and yielded a loss of $22,000. What is Dave’s adjusted gross income after considering the passive activity and rental losses?45. Diane Parker acquired an interest in a movie theater in June 2001. The theater broke even from 2001 to 2008. Parker did not actively participate in the activity during those years. She participated in the activity for 350, 400, 450, and 420 hours during 2009, 2010, 2011, and 2012, respectively. This was well below all other employees. The theater had losses allocated to her of $21,000, $6,000, $19,000, and $12,000 for 2009, 2010, 2011, and 2012, respectively. In 2013, however, she participated 750 hours in the business, and her share of the movie theater net income was $24,000. Her income from other sources (portfolio income) was $27,500. What are the income tax consequences to Diane for 2013?