Kristen is trying to decide how to invest a $10,000 inheritance. One option is to make an additional investment in Rocky Road Excursions in which she has an at-risk basis of $0, suspended losses under the at-risk rules of $7,000, and suspended passive activity losses of $1,000. If Kristin makes this investment, her share of the expected profits this year will be $8,000. If her investment stays the same her share of the expected profits this year will be $1,000. Another option is to invest $10,000 as a limited partner in Ragged Mountain Winery, the investment will produce passive activity income of $9,000. Kristin is in the 24% tax bracket. What are the effects on Kristen's after-tax income from each of the two options?
Kristen is trying to decide how to invest a $10,000 inheritance. One option is to make an additional investment in Rocky Road Excursions in which she has an at-risk basis of $0, suspended losses under the at-risk rules of $7,000, and suspended passive activity losses of $1,000. If Kristin makes this investment, her share of the expected profits this year will be $8,000. If her investment stays the same her share of the expected profits this year will be $1,000. Another option is to invest $10,000 as a limited partner in Ragged Mountain Winery, the investment will produce passive activity income of $9,000. Kristin is in the 24% tax bracket. What are the effects on Kristen's after-tax income from each of the two options?
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter6: Losses And Loss Limitations
Section: Chapter Questions
Problem 23P
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Transcribed Image Text:Kristen is trying to decide how to invest a
$10,000 inheritance. One option is to make
an additional investment in Rocky Road
Excursions in which she has an at-risk basis of
$0, suspended losses under the at-risk rules
of $7,000, and suspended passive activity
losses of $1,000. If Kristin makes this
investment, her share of the expected profits
this year will be $8,000. If her investment
stays the same her share of the expected
profits this year will be $1,000. Another
option is to invest $10,000 as a limited
partner in Ragged Mountain Winery, the
investment will produce passive activity
income of $9,000. Kristin is in the 24% tax
bracket.
What are the effects on Kristen's after-tax
income from each of the two options?
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