Several Years Ago, Tom Purchased a Structure for $300,000 That

question 14

Multiple Choice

Several years ago, Tom purchased a structure for $300,000 that was originally placed in service in 1929.Three and one-half years ago he incurred qualifying rehabilitation expenditures of $600,000.In the current year, Tom sold the property in a taxable transaction.Calculate the amount of the recapture of the tax credit for rehabilitation expenditures.

• A)$0.
• B)$24,000.
• C)$36,000.
• D)$48,000.
• E)None of the above.

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Definitions:

At-risk Rules

These are tax rules designed to limit the amount of deductible losses from businesses or income-producing activities to the amount the taxpayer has at risk.

Passive Loss Rules

Tax regulations that limit the amount of losses investors can deduct from passive activities, including some investments in real estate.

Materially Participate

The level of involvement by a taxpayer in the operations of a business that is sufficient enough to qualify for tax deductions related to active participation.

At-risk Amount

The amount of money in a particular investment that can be claimed as a deduction in the event of a loss.