Darien Owns a Passive Activity That Has a Basis of $36,000

question 107

Multiple Choice

Darien owns a passive activity that has a basis of $36,000 and a suspended loss of $22,000. If Darien dies during the year when the passive activity has a fair market value of $52,000, how will the information be presented on his tax return?
I.Darien will report an ordinary loss of $6,000.
II.Darien will report a capital gain of $16,000.
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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:

Cooperate

The action of working together towards a common goal or benefit.

Arms Race

A competition between nations to achieve superior military capability, often involving the accumulation of weapons and technological advancements.

Prisoners' Dilemma

A situation in game theory where two individuals acting in their own best interest do not produce the optimal outcome for either party.

Military Production

The manufacture and supply of equipment, materials, and services for armed forces and defense purposes.