Charlie Owns Activity B Which Was Considered a Passive Activity

question 83

Multiple Choice

Charlie owns activity B which was considered a passive activity and generated a $17,000 suspended loss.Charlie increases his involvement with activity B so that this year activity B is not considered passive for Charlie.During this year,activity B produces a $9,000 loss.In addition,Charlie acquires an investment in activity X,a passive activity,this year.Charlie's share of activity X's income is $13,000.Charlie's salary this year is $70,000.As a result,this year Charlie must

• A)offset B's loss carryover against X's current income and carry over $9,000 loss from activity B to next year.
• B)offset B's carryover loss and current loss against X's income first and then offset any remaining loss against salary.
• C)offset B's $9,000 loss against X's $13,000 income and offset B's loss carryover against the remaining $4,000 of X's income.
• D)offset B's current $9,000 loss against his salary and offset B's loss carryover against X's income and carry over $4,000 of loss to next year.

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Definitions:

Opportunity Cost

Choosing one path results in the loss of potential benefits that could have been gained from other paths.

German Car

Refers to automobiles manufactured in Germany, known for their engineering, performance, and quality.

Specialization

The process of focusing resources on the production of specific goods or services to increase efficiency and output.

Household Production

The creation of goods and services by individuals or families for their personal use, as opposed to goods and services produced for sale or exchange.