During the Year, Aimee Reports $30,000 of Active Business Income

question 76

Multiple Choice

During the year, Aimee reports $30,000 of active business income, $15,000 of income from passive activity X, and a $25,000 loss from passive activity Y. Determine the tax consequences of these events.
I.The $15,000 income from activity X can offset $15,000 of the loss from activity Y.
II.Any passive loss that is not deducted in the current year is suspended.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Settlement Amount

A financial sum agreed upon by parties in a contract, often referring to the resolution amount in disputes or the completion payment in transactions.

Retained Earnings

The portion of net earnings not paid out as dividends but retained by the company to be reinvested in its core business or to pay debt.

Income Statement

A financial statement that shows a company’s revenues, expenses, and profits or losses over a specific period of time.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership interest.