Investment Activities The Adams did not own, control or manage any foreign bank accounts, nor were they
Question:
Investment Activities
The Adam’s did not own, control or manage any foreign bank accounts, nor were they grantors or beneficiaries of a foreign trust during the tax year.
The Adam’s received the following interest and dividends during the year.
Interest Income | Amount |
Commerce Bank | $6,000 |
City of Kansas City, MO bonds | $3,600 |
U.S. Treasuries | $2,800 |
Dividend Income | Ordinary Dividends | Qualified Dividends |
Amen Inc. | $10,000 | $9,400 |
Masters, Inc. | $5,000 | $4,700 |
Tiger Company | $3,500 | $3,400 |
The Adam’s sold the following stock during the year.
Stock | Date Purchased | Date Sold | Amount Realized | Tax Basis |
Dustin, Inc. | 1/10/2004 | 9/30/2020 | $150,000 | $37,500 |
Augusta Company | 2/9/2020 | 1/15/2020 | $25,000 | $21,200 |
Bubba, Inc. | 2/7/2019 | 7/8/2020 | $12,500 | $20,700 |
Zach Johnson, Inc. | 11/14/2014 | 3/1/2020 | $20,000 | $19,025 |
The Adam’s have a $4,000 long-term capital loss carryover from the prior tax year.
Bailey is a 10% owner in a real estate partnership named Double-Dipping, LP (EIN 50-7654321). The limited partnership reported ordinary business income for the year, of which $35,000 was Bailey’s share. Bailey received a K-1 from the limited partnership reporting her allocable share of the business income. Bailey acquired the interest several years ago. Her basis in the limited partnership and at-risk amount before considering her 2020 income allocation was $42,000. Bailey is a passive owner with respect to this entity.
Grant is a 20% owner in Natural Sunshine, Inc. (“NS”) (EIN 24-9876543). NS is a Subchapter S corporation. The company reported an ordinary business loss for the year of, which $40,000 was Grant’s share. Grant received a K-1 from NS reporting his allocation of this business loss. Grant acquired the stock several years ago. His basis in the stock and at-risk amount before considering the 2020 loss allocation was $25,000. Grant is a passive owner with respect to this entity.
Grant and Bailey are Married Filing Joint with 2 Dependents.
a What is the overall Net Gain or Loss
b What is the Tax basis Limit, At Risk Limit and Passive Loss Limit for Grant and Bailey.
c What is the Adams Total Deductible Losses for the year?
d. How would these go on a tax return?
South-Western Federal Taxation 2019 Comprehensive
ISBN: 9781337703017
42th edition
Authors: David M. Maloney, William A. Raabe, William H. Hoffman, James C. Young