Darien Owns a Passive Activity That Has a Basis of $36,000

question 107

Multiple Choice

Darien owns a passive activity that has a basis of $36,000 and a suspended loss of $22,000. If Darien dies during the year when the passive activity has a fair market value of $52,000, how will the information be presented on his tax return?
I.Darien will report an ordinary loss of $6,000.
II.Darien will report a capital gain of $16,000.
​

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

---

Definitions:

Margin Requirement

The minimum amount of equity that must be maintained in a margin account as dictated by a broker or exchange to hold a position in securities.

Regulation NMS

A set of rules designed to modernize and improve the US National Market System for equity trading.

Financial Markets

Marketplaces where individuals and institutions can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand.

Specialists

Professionals on a stock exchange who are responsible for maintaining a fair and orderly market in their specific assigned securities.