Eric makes an installment sale of a passive activity having suspended losses of $40,000 . He collects 25% of the sales price in the current year, and will collect 25% in each of the next three years. Eric can deduct $10,000 of the passive activity loss this year
a. True
b. False
Indicate whether the statement is true or false
True
RATIONALE: An installment sale of a taxpayer's entire interest in a passive activity entitles the taxpayer to deduct suspended losses on the installment basis. Therefore, Eric can deduct 25% of the $40,000 suspended passive activity loss each year as installments are collected.
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