Anna Owns a Passive Activity That Has a Basis of $30,000

question 37

Multiple Choice

Anna owns a passive activity that has a basis of $30,000 and a suspended loss of $7,000. Anna gifts the passive activity to her daughter Patricia when the property has a fair market value of $42,000.
I.Anna will report an ordinary loss of $7,000.
II.Patricia's basis in the passive activity is $30,000.
​

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

---

Definitions:

Judicial Branch

The branch of government responsible for interpreting the laws and administering justice through courts.

Legal System

The comprehensive framework of rules, regulations, practices, and institutions that govern how laws are enacted, interpreted, and enforced in a specific jurisdiction.

Socialist Legal System

A type of legal system often found in socialist states where the law is used as a tool to effect social change and uphold the ownership and distribution means by the community as a whole.

Foreign Corrupt Practices Act

A U.S. law that prohibits companies and their individuals from bribing foreign officials to gain a business advantage.