david's at-risk amount in a passive activity was $60,000 at the beginning of 2021. his loss from the activity in 2021 is $80,000, and he had no passive activity income during the year. david had $20,000 of passive activity income from the activity in 2022. under the passive activity loss rules, david's suspended loss at the end of 2022 is:

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16-11-2022
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david's at-risk amount in a passive activity was $60,000 at the beginning of 2021. his loss from the activity in 2021 is $80,000, and he had no passive activity income during the year. david had $20,000 of passive activity income from the activity in 2022. under the passive activity loss rules, david's suspended loss at the end of 2022 is:

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topeadeniran2 topeadeniran2 · Answer 1 · 2022-11-22T00:13:00+01:00

Under the passive activity loss rules, David's suspended loss at the end of 2022 is $60,000

What is passive activity loss?

The IRS's passive activity loss rules prohibit the use of passive losses to offset earned or ordinary income.

Being materially involved in earned or ordinary income-producing activities indicates that the income is active and cannot be reduced by passive losses.

The passive activity loss rules generally limit taxpayers' ability to deduct salaries, wages, and interest income. A suspended loss is a capital loss incurred in the current or previous years that cannot be realized until a future year. Capital losses are normally deductible against capital gains or, in some cases, against ordinary income.

Since David's at-risk amount in a passive activity was $60,000, this is the passive activity loss.

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