Business, 21.05.2020 05:05 rishiganesh

Jorge owns two passive investments, Activity A and Activity B. He plans to sell Activity A in the current year or next year. Juanita has offered to buy Activity A this year for an amount that would produce a taxable passive activity gain to Jorge of $115,000. However, if the sale, for whatever reason, is not made to Juanita, Jorge believes that he could find a buyer who would pay about $7,000 less than Juanita. Passive activity losses and gains generated (and expected to be generated) by Activity B follow: Two years ago ($35,000) Last year (35,000) This year (8,000) Next year (30,000) Future years Minimal profits All of Activity B's losses are suspended. Jorge is in the 32% tax bracket. If your answer is zero enter "0". a. If Activity A is sold to Juanita in the current year: How are the suspended losses for Activity B treated? What is the Federal income tax related to the sale of Activity A? $ b. If Activity A is sold next year for $7,000 less than Juanita's offer: How are the suspended losses for Activity B treated? What is the Federal income tax related to the sale of Activity A? $ If Jorge defers the sale until next year, he will his short-term cash flow. In addition, the expected gain from the sale offset by all of the suspended passive activity loss from Activity B.

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Jorge owns two passive investments, Activity A and Activity B. He plans to sell Activity A in the cu...

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