Anna Owns a Passive Activity That Has a Basis of $30,000

question 37

Multiple Choice

Anna owns a passive activity that has a basis of $30,000 and a suspended loss of $7,000. Anna gifts the passive activity to her daughter Patricia when the property has a fair market value of $42,000.
I.Anna will report an ordinary loss of $7,000.
II.Patricia's basis in the passive activity is $30,000.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Negotiable Note

A written promise to pay a specific sum of money, which is transferable to other parties under certain conditions.

Good Faith

The sincere intention to be fair, open, and honest, regardless of the outcome of the interaction.

Authenticity

The quality of being genuine or not counterfeit or copied, often verified through documentation or expert examination in the context of art, documents, or items of historical significance.

Negotiable

Relates to legal instruments, such as checks or bills of lading, that can be transferred from one party to another, changing ownership by endorsement.