On January 1, year one, Maria borrows $70,000 from a commercial bank and uses the loan...
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On January 1, year one, Maria borrows $70,000 from a commercial bank and uses the loan proceeds, together with $30,000 of her own funds, to purchase the food and souvenir concession at a local ballpark. The loan is nonrecourse. In year one the concession has a taxable loss of $40,000. In year two the concession has taxable income from operations of $25,000. Maria does not contribute or withdraw any funds from the operation in year one or year two. Maria materially participates in the activity during both years. a. How much, if any, of the concession loss may Maria deduct in year one? b. How much, if any, of the concession income must Maria report in year two? c. Assume the same facts as in part (a), except that the $70,000 loan is recourse. How much, if any, of the year one loss may Maria deduct? On January 1, year one, Maria borrows $70,000 from a commercial bank and uses the loan proceeds, together with $30,000 of her own funds, to purchase the food and souvenir concession at a local ballpark. The loan is nonrecourse. In year one the concession has a taxable loss of $40,000. In year two the concession has taxable income from operations of $25,000. Maria does not contribute or withdraw any funds from the operation in year one or year two. Maria materially participates in the activity during both years. a. How much, if any, of the concession loss may Maria deduct in year one? b. How much, if any, of the concession income must Maria report in year two? c. Assume the same facts as in part (a), except that the $70,000 loan is recourse. How much, if any, of the year one loss may Maria deduct?
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Answer rating: 100% (QA)
a In year one with a nonrecourse loan Maria can deduct the concessions loss up to the ... View the full answer
Related Book For
South-Western Federal Taxation 2018 Comprehensive
ISBN: 9781337386005
41st Edition
Authors: David M. Maloney, William H. Hoffman, Jr., William A. Raabe, James C. Young
Posted Date:
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