Dorothy acquired a 100% interest in two passive activities: Activity A in January 2014 and Activity B in 2015. Through 2017, Activity A was profitable, but it produced losses of $200,000 in 2018 and $100,000 in 2019. Dorothy has passive activity income from Activity B of $20,000 in 2018 and $40,000 in 2019. After offsetting passive activity income, how much of the net losses may she deduct?

Question

Business

Alicia Dean

11 November, 20:43

Dorothy acquired a 100% interest in two passive activities: Activity A in January 2014 and Activity B in 2015. Through 2017, Activity A was profitable, but it produced losses of $200,000 in 2018 and $100,000 in 2019. Dorothy has passive activity income from Activity B of $20,000 in 2018 and $40,000 in 2019. After offsetting passive activity income, how much of the net losses may she deduct?

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Answers (2)

Know the Answer?

Morgan Bray · Answer 1

2018 and 2019 she can't deduct anything, $0.

2018 going into 2019 she can suspend $180,000

2019 going into 2020 she can suspend $240,000

Cael Bernard · Answer 2

Net losses to be deducted after offsetting passive activities = $240000

Explanation:

In 2014 activity A made 100% profit

in 2015 activity B made 100% profit

in 2018 activity A made = $200000 loss

in 2019 activity A made = $100000 loss

total loss from activity A = $300000

Activity B in 2018 made = $20000 profit

Activity B in 2019 made = $40000 profit

total profit from activity B = $60000

To offset passive activity subtract passive profit from activity B from passive loss of Activity A

= loss from activity A - profit from activity B = $300000 - $60000

= $240000