8.6.1

Five years ago Gerald invested $150,000 in a passive activity, his sole investment venture. On January 1, 2019, his amount at risk in the activity was $30,000. His shares of the income and losses were as follows: Year 2019 Income (Loss) ($40,000) (30,000) 50,000 2020 2021 Gerald holds no suspended at-risk or passive activity losses at the beginning of 2019. If an answer is zero, enter "0". a. If losses were limited only by the at-risk rules, how much can Gerald deduct in 2019 and 2020? Year Loss Allowed Suspended 2019 ($40,000) $ 30,000 10,000 2020 ($30,000) 0 30,000 Total 40,000 b. Refer to the information in part (a) above. If losses were limited by the at-risk and the passive activity loss rules, how much would Gerald be able to deduct in 2019 and 2020? Of the allowable at-risk loss for 2019, Gerald may deduct $ in 2019 due to the passive loss rules and of the allowable at-risk loss from 2020, Gerald may deduct $ in 2020 due to the passive loss rules. C. Assuming Gerald has $50,000 income in 2021, (and considering both at-risk and passive activity loss rules), what is the amount of Gerald's suspended losses at the end of 2021? Suspended under the at-risk rules: $ . Suspended under the passive activity loss rules: $ What is his taxable income for 2021? $ At the end of 2021, what is the amount of Gerald's adjusted basis in the activity? $