Several Years Ago, Joy Acquired a Passive Activity

question 25

Short Answer

Several years ago, Joy acquired a passive activity. Until 2017, the activity was profitable. Joy's at-risk amount at the beginning of 2017 was $250,000. The activity produced losses of $100,000 in 2017, $80,000 in 2018, and $90,000 in2019. During the same period, no passive activity income was recognized. How much is suspended under the at-risk rules and the passive activity loss rules at the beginning of 2020? $\begin{array}{l}\begin{array}{lr}\text { At-risk }&\text { Passiveactivityloss }\\\text { a. } \$ 0 & \$ 270,000 . \\\text { b. } \$ 20,000 . & \$ 250,000 . \\\text { c. } \$ 30,000 . & \$ 240,000 . \\\text { d. } \$ 260,000 . & \$ 0,000 .\end{array}\\\text { e. None of these. }\end{array}$

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Definitions:

Illusory Contract

A supposed agreement that lacks the necessary elements of a binding contract, giving the illusion of a mutual contract without any enforceable commitment.

Consideration Requirement

The consideration requirement is a fundamental principle of contract law that mandates a contract must involve an exchange of value between the parties for it to be legally binding.

Monetary Value

The specific amount of money something is worth, often determined by market conditions, demand, and utility.

Promissory Estoppel

A legal doctrine preventing an individual from reneging on a promise when another person has reasonably relied on that promise to their detriment.