Ferris owns an interest in, but does not materially participate in, an activity. He has $30,000 at-risk. The business produced a loss in the current year and Ferris's share of the loss is $45,000. Assuming Ferris has no passive income, how much of the $45,000 loss will be deductible by Ferris?
A) $0.
B) $30,000.
C) $45,000.
D)Cannot be determineD.Only $30,000 of the loss gets through the at-risk rules. However, since there is no passive income, the entire loss is suspended by the passive activity loss rules.

Question

Quizplus · Accepted Answer

Since Ferris does not materially participate and has no passive income, the entire loss is suspended under passive activity loss rules, making the deductible amount $0.

Ferris Owns an Interest In, but Does Not Materially Participate