Question 1

A taxpayer had the following income in the current year: Salary $50,000; Partnership Income (active) $10,000; Interest Income $2,000. The taxpayer also had a $5,000 loss from a rental real estate activity in which they actively participated (AGI is well below phase-out limits). What is the taxpayer's Adjusted Gross Income (AGI)?

Accepted Answer

Sum income sources. Check if rental loss is deductible (Active participation + Low AGI = Yes, up to $25k).

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Disallowing the rental loss (forgetting the exception) or adding it.

How to approach this question

Full Answer

Common mistakes

Practice the full CPA REG Practice Exam 2

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