Pat Sells a Passive Activity for $100,000 That Has an Adjusted

question 35

Essay

Pat sells a passive activity for $100,000 that has an adjusted basis of $55,000. During the years of her ownership,
$60,000 of losses have been incurred that were suspended under the passive activity loss rules. In addition, the passive activity generated tax credits of $10,000 that were not utilized and suspended. Determine the tax treatment to Pat on the disposition of the property.

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Definitions:

Deceive

To intentionally mislead or give a false impression to others, often to gain some advantage or hide the truth.

Divert

To change the direction or course of something, often to avoid a problem or to distract attention.

Project

A planned set of interrelated tasks to be executed over a fixed period and within certain cost and other limitations, aimed at achieving a specific goal.

Politeness Theory

Theory that people have positive perceptions of others who treat them politely and respectfully.