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Sal is a 50% owner in a seafood restaurant. He has been a material participant...

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Accounting

Sal is a 50% owner in a seafood restaurant. He has been a material participant in the activity for the previous 25 years. Although he retired from the restaurant at the end of last year and will not participate in the activity in the future, he still owns the 50% interest. Sal is a material participant in a clothing store where he is a 50% partner. Sal treats the restaurant and clothing store as separate activities. The restaurant incurred a loss for the current year. Sal's share of the loss is $50,000. The clothing store business generated income during the year. Sal's share of the income from the clothing store business is $100,000. He does not own interests in any other activities, (Ignore any at-risk limitations). Which of the following is correct?

a. Sal cannot deduct the $50,000 loss from the restaurant in the current yearbecause he is no longer a material participant.

b. Sal cannot deduct any losses from the restaurant until he either sells or disposes of the activity or becomes a material participant in the future.

c. Sal can only deduct losses from the restaurant when he has income from the restaurant in future years.

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