Exam 13: At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Tax preference items can be either positive or negative.

Oliver has an $80,000 loss from an investment in a partnership in which he does not materially participate. He paid $60,000 for his interest. Oliver also has $10,000 of passive income from another limited partnership. How much of the loss, if any, is disallowed by the at-risk rules? How much is disallowed by the passive loss rules?

Paul invests $10,000 cash in an equipment leasing activity for a 15% ownership share in the business. The remaining 85% owner is Amanda. Amanda contributes $10,000 and personally borrows $75,000 that she also invests in the business. What are the at-risk amounts for Paul and Amanda?

Elijah owns an apartment complex that he actively manages. Elijah paid $300,000 cash for the apartment complex three years ago. During 2015, the rental activity generated a loss of $30,000. How much of the loss can Elijah deduct in 2015 in both of the following independent cases? a. Elijah has $80,000 of AGI (salary) before considering the loss generated by the apartment building. b. Elijah has $120,000 of AGI (salary) before considering the loss generated by the apartment building.

Which of the following is a passive activity?

In 2015, Nigel contributes cash of $10,000 in exchange for a 20% interest in the NDP Partnership. The partnership is not a passive activity. For 2015, the partnership had an ordinary loss of $80,000, interest income of $2,000, dividends of $5,000, and capital gains of $4,000. How much of the current year loss is deductible by Nigel and what is Nigel's at-risk amount on December 31, 2015?

The standard deduction is added back as a positive adjustment to AMTI.

Antonio reported the following itemized deductions on his 2015 tax return. His AGI for 2015 was $95,000. The mortgage interest is all qualified mortgage interest to purchase his personal residence. For AMT, compute his total adjustment for itemized deductions.

Clio's hot dog stand is only open during lunch on weekdays. In total, Clio, who is the sole owner and operator, worked 450 hours at the hot dog stand during the year. Clio is not considered a material participant with respect to the hot dog stand business.

Jordan purchased a warehouse for $600,000. $100,000 of the cost was properly allocated to the land. a. If the property was purchased in April of 1998, what is the AMT depreciation adjustment required in 2015? b. If the property was purchased in April of 2015, what is the AMT depreciation adjustment required in 2015?

The Tara Partnership (not involved in real estate) generated income of $75,000 during the year. Since the partnership is involved in an activity that is subject to the at-risk rules, all of Tara's partners must file Form 6198 with their individual income tax returns.

Heather purchased furniture and fixtures (7-year property) for her retail shop for $50,000. What is the AMT depreciation adjustment required in 2015 if the property was purchased in May 2015, assuming no bonus depreciation was taken?

Baxter invested $50,000 in an activity in 2011. At the beginning of 2013, Baxter's at-risk amount was $10,000. Baxter's share of losses from the activity were as follows: If you ignore the passive loss rules, how much income/loss will Baxter have from the activity in 2015?

Cory sells his entire interest in a rental property in which he actively participated at a gain of $12,000. The activity has a current year loss of $4,800 and $16,000 in prior year suspended losses. During the year, Cory has $80,000 in salary. What is Cory's AGI for the year?

A taxpayer's share of nonrecourse debt is considered an amount at-risk.

After computing all tax preferences and AMT adjustments, Adam and his wife Cindy have AMTI of $290,000. If Adam and Cindy file a joint tax return, what exemption amount can they claim for AMT for 2015?

Adjustments to AMTI can be either positive or negative.

In 2013, Mary invested $200,000 in a business that is not a passive activity. During 2014, her share of the business loss is $140,000. In 2015, her share of the business loss is $100,000. How much can Mary deduct in 2014 and 2015?

If a limited partner materially participates in the trade or business of a limited partnership, the passive loss rules still apply.

Two equal partners involved in a passive activity with identical passive losses from that activity may be allowed to deduct different amounts of the losses on their own tax returns.