LO.3, 11 Larry owns two passive investments, Activity A and Activity B. He plans to dispose of

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LO.3, 11 Larry owns two passive investments, Activity A and Activity B. He plans to dispose of Activity A in the current year or next year. Celene has offered to buy Activity A this year for an amount that would produce a taxable passive gain to Larry of $100,000.

However, if the sale, for whatever reason, is not made to Celene, Larry believes that he could find a buyer who would pay about $6,000 less than Celene. Passive losses and gains generated (and expected to be generated) by Activity B follow:

Two years ago ($35,000)

Last year (35,000)

This year (5,000)

Next year (19,000)

Future years Minimal profits All of Activity B’s losses are suspended. Should Larry close the sale of Activity A with Celene this year, or should he wait until next year and sell to another buyer? Larry is in the 28% tax bracket.

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