ExpertHard1 markMultiple Choice
CPA · Question 32 · Area 3: Individual Taxation
Taxpayer (AGI 30,000) actively participates in a rental real estate activity that produced a ,000 loss. They have no other passive income. How much of the loss can they deduct against ordinary income?
Taxpayer (AGI 30,000) actively participates in a rental real estate activity that produced a ,000 loss. They have no other passive income. How much of the loss can they deduct against ordinary income?
Answer options:
A.
0
B.
,000
C.
,000
D.
,000
How to approach this question
Mom & Pop Rule: Max 25k deduction. Phase-out starts at 100k AGI. Lose 50 cents for every dollar over 100k. At 130k AGI, you are 30k over. Lose 15k of the limit. Limit is now 10k.
Full Answer
C.,000✓ Correct
,000
The ,000 rental real estate exception is reduced by 50% of the amount by which AGI exceeds 0,000. Reduction: (130k - 100k) * 50% = 15k. Remaining allowance: 25k - 15k = 10k.
Common mistakes
Forgetting the phase-out or applying it to the loss amount rather than the maximum allowance.
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