Complete the following. In these problems, apply your knowledge of the rules and laws associated with at-risk or passive activity losses, as well as the individual AMT.
Problem 37, on page 13-41.
Problem 40, on page 13-41.
Problem 37:
Cindy, Casey, and Kara each invested $30,000 in a real estate venture. The partnership borrowed
$200,000 and purchased a warehouse for $290,000. The note was secured by the building; there was no
personal recourse against the partners. What is each partner’s beginning at-risk amount in the venture?
Problem 40:
Darrell acquired an activity eight years ago. The loss from it in the current year was $65,000. The activity
involves residential rental real estate in which he is an active participant. Calculate Darrell’s AGI after
considering that Darrell’s AGI was $100,000 before including any potential loss.
Problem 44:
This year Robert had the following income and losses from four passive activities:
Activity 1
Activity 2
Activity 3
Activity 4
$(20,000)
(10,000)
(5,000)
33,000
Activity 4 had $10,000 of passive losses that are carried over from a prior year. Robert also had wages of
$110,000.
a. How much income or loss does Robert have from the four activities?
b. How are the suspended PALs allocated?
c. If Activity 1 were sold at an $18,000 gain, what would be the total income or loss from the four
activities?
Problem 47:
Jackson invested $190,000 in a passive activity five years ago. On January 1, 2016, his at-risk amount in
the activity was $45,000. His share of the income and losses in the activity were $52,000 loss in 2016,
$20,000 loss in 2017, and $80,000 gain in 2018. How much can Jackson deduct in 2016 and 2017? What
is his taxable income from the activity in 2018? Keep in mind the at-risk rules as well as the passive loss
rules.
Problem 48:
Hunter has a $38,000 loss from an investment in a partnership in which he does not participate. His
basis in the interest is $35,000.
a. How much of the loss is disallowed by the at-risk rules?
b. How much of the loss is disallowed by the passive loss rules?
Problem 51:
Benny sells an apartment building. His adjusted basis for regular income tax purposes is $450,000, and it
is $475,000 for AMT purposes. He receives $700,000 from the sale.
a. Calculate Benny’s gain for regular income tax purposes.
b. Calculate Benny’s gain for AMT purposes.
c. Calculate any applicable AMT adjustment.
Problem 54:
Herbie is the owner of two apartment buildings. Following is information related to the two buildings:
Land
Building A
Building B
Date Acquired
Total Cost
Cost Allocated to
3/15/98
8/31/04
$300,000
600,000
$40,000
95,000
Herbie elected the maximum depreciation available for each asset. What is the effect of depreciation on
AMTI for 2018?
Problem 57:
Barbara is single and owns a home in the city, which is her primary residence. She also owns a cottage at
the beach, which she treats as a vacation home. In April 2018, she borrowed $50,000 on a home equity
loan and used the proceeds to pay off credit card obligations and other debt. She paid the following in
2018:
Mortgage interest (personal residence)
Mortgage interest (cottage)
Interest on the home equity loan
Interest on credit card
$15,000
8,000
5,000
2,500
Calculate any AMT adjustment concerning interest in 2018.
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