Five years ago Gerald invested $198,000 in a passive activity, his sole investment venture. On January 1, 2018, his amount at risk in the activity was $39,600. His shares of the income and losses were as follows:

Year Income (Loss)

2018 ($59,400)

2019 (39,600)

2020 59,600

Gerald holds no suspended at-risk or passive activity losses at the beginning of 2018.

a.If losses were limitedonlyby the at-risk rules, how much can Gerald deduct in 2018 and 2019?

Year: 2018 Loss: ($59,400) How much is allowed? How much is suspended?

Year: 2019 Loss:($39,600) How much is allowed? How much is suspended?

What is the total amount suspended?

b.Refer to the information in part (a) above. If losses were limited by the at-riskandthe passive activity loss rules, how much would Gerald be able to deduct in 2018 and 2019?

c.Assuming Gerald has $59,600 income in 2020, (and consideringbothat-risk and passive activity loss rules), what is the amount of Gerald's suspended losses at the end of 2020?

• What is the amount suspended under the at-risk rules?
• What is the amount suspended under the passive activity loss rules?
• What is his taxable income for 2020?
• At the end of 2020, what is the amount of Gerald's adjusted basis in the activity?