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:

Worker

An individual engaged in a specific activity or labor, especially for economic gain.

Credit Card

A card issued by a financial institution that allows the cardholder to borrow funds with which to pay for goods and services with the promise to repay these funds, plus any agreed charges.

Over-optimism

The tendency to overestimate the likelihood of positive outcomes in the future.

Consumer

An individual or group that purchases goods or services for personal use.