[Stgeorge]

In the current year, a taxpayer reports the following items:

Salary $50,000

Income from Partnership A, in which the

taxpayer materially participates 20,000

Passive activity loss from Partnership B (40,000)

During the year, the taxpayer disposed of the interest in Partnership B, which had a suspended loss carryover of $10,000 from prior years. What is the taxpayer’s adjusted gross income for the current year?

A.

$20,000

B.

$30,000

C.

$60,000

D.

$70,000

I would think the correct answer is D since Passive activity losses can not offset non passive activity income. But according to the explanation the correct answer is A

Explanation:

Adjusted gross income is calculated by subtracting business expenses and other deductions from gross income. The adjusted gross income is $20,000, calculated as follows:

Salary $50,000

Income from partnership 20,000

Passive loss from Partnership B (40,000)

Suspended loss carryover (10,000)

---

Adjusted gross income $20,000

Because the taxpayer disposed of ownership in Partnership B during the year, he may take all of the loss up to the amount of his basis in the partnership.

FAR 81
AUD 65, 84 (Used Ninja MCQ which I say contributed to my huge increase in score I love you Jeff)
REG 87 (CPA excel Wiley Self Study Book, Ninja 10 point combo)
BEC 86! I Must Pass or I lose my FAR Credit, Pray for me(Becker, Wiley, WTB, Ninja MCQ, Ninja Notes)

DONE!!!!!!

Using : Wiley CPA Exam Review Textbook, Wiley TB, Ninja Notes, Ninja MCQ