Question & Answer: 9. In 2014, Declan invested $100,000 in a passive activity business. Declan’s share of the business’ losses for 2014 was $25,000, an…..

9. In 2014, Declan invested $100,000 in a passive activity business. Declan’s share of the business’ losses for 2014 was $25,000, and Declan had no passive income for 2014. Declan’s share of the business’ losses for 2015 was $5,000, and Declan had no passive income for 2015. On January 1, 2016, Declan sold his interest in the passive activity business. Declan’s only other income for 2016 was salary of $50,000 per year. What amount of passive activity losses can Declan deduct in 2016?

Expert Answer

As per sec 469(g)1, if passive activity property is disposed, it no longer remains a PAL rules property, so all the losses from PAL is deductible in 2016 i.e $30,000.

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