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1 Pat invests in a limited partnership and pays $150,000 for a 10% interest
1
Pat invests in a limited partnership and pays $150,000 for a 10% interest. He receives a K-1 with his loss at $80,000. How much of his loss is suspended under the at-risk rules?
a. $0.
b. $8,000.
c. $15,000.
d. $80,000.
2
Which of the following statements concerning the Alternative Minimum Tax (AMT) system is correct?
a. A taxpayer who takes the standard deduction will not be required to calculate tax under the AMT.
b. Business-related expenses are never adjustment or preference items under the AMT.
c. A taxpayer exercising a large number of ISOs can avoid the AMT by selling the shares in the same tax year.
d. The AMT credit can be carried back for up to two years, then forward up to 5 years.
Expert Solution
1
To determine whether any of the losses are suspended you must first apply the at-risk rules, then the passive loss rules. The amount at risk is the basis of $150,000. Since the loss is less than the amount at risk, none of the loss is suspended due to the at-risk rules. In applying the passive loss rules, the passive loss is limited to the amount of passive income for the year. Since there is no passive income for the year, none of the loss may be recognized and the $80,000 loss is suspended.
Option D
2
Answer: (d)
You can carry forward the difference between the AMT that you pay and your regular tax liability for seven years. ... This provision allows you to use the AMT you paid as a credit against your future regular taxes up to the AMT amount in future years.
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