Problem 4-3 (Algorithmic) Passive Loss Limitations (LO 4.2)

Walter, a single taxpayer, purchased a limited partnership interest in a tax shelter in 1991. He also acquired a rental house in 2017, which he actively manages. During 2017, Walter's share of the partnership's losses was $20,500, and his rental house generated $29,000 in losses. Walter's modified adjusted gross income before passive losses is $142,500.

If an amount is zero, enter "0".

a. Calculate the amount of Walter's allowable deduction for rental house activities for 2017. $

b. Calculate the amount of Walter's allowable deduction for the partnership losses for 2017. $

c. What may be done with the unused losses, if anything? (CORRECT)

The unused losses may be carried forward to future tax years to reduce passive income in those years.