Leigh, Who Owns a 50% Interest in a Sporting Goods

question 8

Multiple Choice

Leigh, who owns a 50% interest in a sporting goods store, was a material participant in the activity for the last fifteen years. She retired from the sporting goods store at the end of last year and will not participate in the activity in the future. However, she continues to be a material participant in an office supply store in which she is a 50% partner. The operations of the sporting goods store resulted in a loss for the current year and Leigh's share of the loss is $40,000. Leigh's share of the income from the office supply store is $75,000. She does not own interests in any other activities.

• A) Leigh cannot deduct the $40,000 loss from the sporting goods store because she is not a material participant.
• B) Leigh can offset the $40,000 loss from the sporting goods store against the $75,000 of income from the office supply store.
• C) Leigh will not be able to deduct any losses from the sporting goods store until future years.
• D) Leigh will not be able to deduct any losses from the sporting goods store until she has been retired for at least four years.
• E) None of the above.

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Definitions:

Trade Embargoes

Government-imposed restrictions on the exchange of goods and services with a particular country or group of countries.

USMCA

The United States-Mexico-Canada Agreement, a free trade agreement between these three countries that replaced NAFTA.

NAFTA

The North American Free Trade Agreement is a treaty between Canada, Mexico, and the United States that eliminated most tariffs on trade between these nations, aiming to increase economic integration.

Trade Agreement

A treaty between two or more countries to outline how they will work together to ensure mutual benefit in trade, often involving tariff reductions, import quotas, and other trade incentives.