Question 1. In the current year, Lucile, who has AGI of $70,000 before consid

1. In the current year, Lucile, who has AGI of $70,000 before considering rental activities, is active in three separate real estate rental activities and is in the 28% tax bracket. She had $15,000 of losses from Activity A, $25,000 of losses from Activity B, and income of $20,000 from Activity C. She also had $3,100 of tax credits from Activity A. Calculate her deductions and credits currently allowed and the suspended losses and credits.

2. Last year, Wanda gave her daughter a passive activity (adjusted basis of $80,000; fair market value of $160,000) with suspended losses of $20,000. In the current year, her daughter realizes income of $10,000 from the activity. What are the tax effects to Wanda and her daughter?

3. Barb borrowed $100,000 to acquire a parcel of land to be held for investment purposes and paid interest of $11,000 $75,000 for the year. Other items related to Barb’s investments include the following:

Investment income $10,000

Long-term capital gain on sale of stock 7,500

Investment counsel fees 500

Barb is unmarried and does not itemize her deductions.

a. Determine Barb’s current investment interest deduction, assuming she does not make any

special election regarding the computation of investment income.

b. Discuss the treatment of Barb’s investment interest that is disallowed in the current year.

c. What election could Barb make to increase the amount of her current investment interest deduction?

b. Barb could increase her investment interest deduction by electing to treat the LTCG as investment i her investment income for purposes of calculating her investment interest deduction. She would be a $11,000 of investment interest expense. If she makes the election, the amount so elected could not b capital gains tax rate.

4. Describe the types of activities and taxpayers that are subject to the at-risk rules.

5. Identify how the passive loss rules broadly classify various types of income and losses. Provide examples of each category.

6. Discuss the treatment given to suspended passive activity losses and credits. What happens to an activity’s unused losses and credits when the activity is sold?

7. List the taxpayers that are subject to the passive loss rules and summarize the general impact of these rules on these taxpayers.

8. What special passive loss treatment is available to real estate activities?