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

question 31

Multiple Choice

Leigh, who owns a 50% interest in a sporting goods store, was a material participant in the activity for the last 15 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 these these applies here.