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:

Modus Tollens

A form of logical argument where the denial of the consequent leads to the denial of the antecedent, symbolically represented as "If P then Q; not Q; therefore not P."

Hypothetical

Based on or serving as a hypothesis, suggesting a possible scenario or assumption for the sake of argument.

Hypothetical Syllogism

A form of logical argument involving two conditional statements and a conclusion that infers a relationship based on the preceding premises.

Tasted Awful

Describes a very unpleasant flavor experienced when consuming certain foods or drinks.