Sarah Owns a Passive Activity That Has a Suspended Loss

question 57

Multiple Choice

Sarah owns a passive activity that has a suspended loss of $18,000. The activity has a fair market value of $35,000 and her adjusted basis in the activity is $20,000.
I.If Sarah sells the activity, she is allowed to deduct the $18,000 suspended loss.
II.If Sarah gifts the activity, she is only be allowed to deduct $15,000 of the suspended loss.
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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:

Marijuana

A psychoactive drug from the Cannabis plant used for medical or recreational purposes, known for its sedative and psychoactive effects.

Shipment Seized

This refers to the confiscation or taking hold of goods by authorities, usually due to regulatory or legal issues.

Equilibrium Price

The cost at which the supply and demand for goods are exactly balanced in the market.

Fine

A sum of money required to be paid as a penalty for breaking the law or rules.