Josh Has Investments in Two Passive Activities

question 111

Multiple Choice

Josh has investments in two passive activities. Activity A, acquired three years ago, produces income in the current year of $60,000. Activity B, acquired last year, produces a loss of $100,000 in the current year. At the beginning of this year, Josh's at-risk amounts in Activities A and B are $10,000 and $100,000, respectively. What is the amount of Josh's suspended passive activity loss with respect to these activities at the end of the current year?

• A) $0
• B) $36,000
• C) $40,000
• D) $100,000
• E) None of the above

---

Definitions:

Conversion Ratio

In finance, the ratio at which one form of security (such as convertible bonds) can be exchanged for another form of security, such as stock.

Conversion Premium

The extra amount an investor pays above the convertible security's underlying asset value, reflecting the cost to convert into equity at a later date.

Conversion Value

The financial value of converting an investment from one form to another, often used in the context of convertible securities.

Straight Bond Value

The present value of a bond's future interest payments and its principal amount at maturity, assuming it does not have any embedded options.