Hugh Has Four Passive Activities Which Generate the Following Income

question 41

Essay

Hugh has four passive activities which generate the following income and losses in the current year.
How much of the $80,000 net passive loss can Hugh deduct this year? Calculate the suspended losses (by activity).

---

Definitions:

Cumulative Dividends

Dividends on preferred shares that accumulate if not paid in one period and must be paid out before dividends can be distributed to common shareholders.

Discontinued Operations

Components of a business that have been sold or otherwise disposed of, or are classified as held for sale, and represent a separate major line of business or geographical area of operations.

Consolidated Net Income

The total net income of a parent company and its subsidiaries, after adjustments for minority interests, reported on a combined basis as if the group were a single entity.

Fair Value Enterprise Method

A valuation technique that estimates the value of an entire enterprise as if it were traded in the market, often used in the context of business combinations.