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Practice CPA®CPA TCP Practice Exam 2Question 64

Medium1 markMultiple Choice

Area I: Individual Compliance and PlanningTCPIndividual TaxPassive Activity

CPA · Question 64 · Area I: Individual Compliance and Planning

A taxpayer has a $20,000 loss from a rental activity (active participation). AGI is $140,000. What is the deductible loss?

Answer options:

A.

$20,000

B.

$5,000

C.

$0

D.

$10,000

How to approach this question

1. Excess AGI = $40k. 2. Reduction = $20k. 3. Allowance = $25k - $20k = $5k.

Full Answer

B.$5,000✓ Correct

$5,000

IRC §469(i). $25,000 allowance reduced by 50% of AGI over $100,000. Reduction = $20,000. Allowed = $5,000.

Common mistakes

Deducting the full $20k loss.

Question 63 All questions Question 65

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