CPA · Question 12 · Area I: Individual Compliance and Planning

A taxpayer sells their entire interest in a passive activity to an unrelated party in a fully taxable transaction. The activity has $15,000 of current year loss and $25,000 of suspended passive losses from prior years. In the year of sale, the activity generates a $10,000 gain on sale. The taxpayer has $5,000 of passive income from other sources. How much of the loss from the disposed activity is deductible against non-passive (active/portfolio) income?