Pat Sells a Passive Activity for $100,000 That Has an Adjusted

question 35

Essay

Pat sells a passive activity for $100,000 that has an adjusted basis of $55,000. During the years of her ownership,
$60,000 of losses have been incurred that were suspended under the passive activity loss rules. In addition, the passive activity generated tax credits of $10,000 that were not utilized and suspended. Determine the tax treatment to Pat on the disposition of the property.

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Definitions:

Discharge

The act of releasing an individual or entity from a legal obligation, such as a debt or duty.

Remortgage Without Consent

The act of obtaining a new mortgage on a property without the approval or agreement of the existing lender or relevant parties who have an interest in the property.

Municipal Taxes

Local government levies imposed on property owners to fund public services such as schools, roads, and emergency services.

Insure Premises

The process of obtaining insurance coverage for physical property against loss or damage.