3) Given that losses from passive activities can only offsetincome from passive activities unless the passive activity is sold,what types of activities are not considered to be passive? Name atleast three ways (tests) a taxpayer may be treated as an activeparticipant in an activity.
Learning Objective: 07-04 Apply tax-basis, at-risk, and passiveactivity loss limits to losses from passive investments
4) During all of 2018, Mr. and Mrs. Clay lived with their fourchildren (all are under the age of 17). They provided over one-halfof the support for each child. Mr. and Mrs. Clay file jointly for2018. Neither is blind, and both are under age 65. They reportedthe following tax-related information for the year: (Use the taxrate schedules)
| |
Salary income | $125,000 |
Prize from local radio station | 1,500 |
Medical expenses (no health insurance) | 4,000 |
Real estate taxes | 4,200 |
Alimony paid by Mr. Clay (divorced in 2015) | 12,000 |
State income taxes withheld in 2018 | 1,800 |
State income taxes paid with 2018 tax return (return was filedin April, 2019) | 1,500 |
Federal income tax withholding | 7,500 |
Qualified home mortgage interest (acquisition debt of$300,000) | 15,000 |
Charitable contributions | 4,000 |
A. What is the Clays' taxes payable or (refund due) (ignore thealternative minimum tax)?
B. What is the Clays' tentative minimum tax and alternativeminimum tax?
Learning Objective: 08-05 Explain how to compute a taxpayer'sunderpayment, late filing, and late payment penalties.
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