LO.2, 3, 7 Five years ago Gerald invested $150,000 in a passive activity, his sole investment venture. On January 1, 2011, his amount at risk in the activity was $30,000. His shares of the income and losses were as follows:

Year Income (Loss)

2011 ($40,000)

2012 (30,000)

2013 50,000 How much can Gerald deduct in 2011 and 2012? What is his taxable income from the activity in 2013? Consider the at-risk rules as well as the passive loss rules.