Salvador Owns a Passive Activity That Has a Basis of $44,000

question 115

Multiple Choice

Salvador owns a passive activity that has a basis of $44,000 and a suspended loss of $18,000. Salvador's taxable income from active and portfolio income is $55,000. If Salvador's sells the passive activity for $56,000 how will he report the transaction on his tax return?
I.Salvador will report an ordinary loss of $18,000.
II.Salvador will report a capital gain of $12,000.
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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:

Health Care Costs

The total expenditures for services and products related to the treatment and prevention of disease or the maintenance of health.

Overallocation

A situation where resources are allocated in excess to a particular good or service, often leading to inefficiency and waste.

Resources

Assets, materials, or substances that are available and valuable in producing goods or providing services.

Externalities

Costs or benefits that affect a party who did not choose to incur that cost or benefit, caused by an economic transaction.