Charlie owns activity B which was considered a passive activity and generated a $17,000 suspended loss. Charlie increases his involvement with activity B so that this year activity B is not considered passive for Charlie. During this year, activity B produces a $9,000 loss. In addition, Charlie acquires an investment in activity X, a passive activity, this year. Charlie's share of activity X's
income is $13,000. Charlie's salary this year is $70,000. As a result, this year Charlie must
A) offset B's loss carryover against X's current income and carry over $9,000 loss from activity B to next year.
B) offset B's carryover loss and current loss against X's income first and then offset any remaining loss against salary.
C) offset B's $9,000 loss against X's $13,000 income and offset B's loss carryover against the remaining $4,000 of X's income.
D) offset B's current $9,000 loss against his salary and offset B's loss carryover against X's income and carry over $4,000 of loss to next year.
D) offset B's current $9,000 loss against his salary and offset B's loss carryover against X's income and carry over $4,000 of loss to next year.
Charlie may deduct Activity B's current $9,000 loss since it is not a passive activity. He may also offset passive activity X's income of $13,000 with the $17,000 carryover from Activity B resulting in a $4,000 carryover.
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