ExpertMedium1 markMultiple Choice
CPA · Question 37 · Area I: Individual Compliance and Planning
A taxpayer has a $30,000 loss from a rental real estate activity in which they actively participate. Their MAGI is $130,000. What amount of loss can be deducted against active income in the current year?
A taxpayer has a $30,000 loss from a rental real estate activity in which they actively participate. Their MAGI is $130,000. What amount of loss can be deducted against active income in the current year?
Answer options:
A.
$25,000
B.
$10,000
C.
$0
D.
$30,000
How to approach this question
1. Max Exception = $25,000. 2. Excess MAGI = MAGI - $100,000. 3. Reduction = 50% * Excess MAGI. 4. Allowable = $25,000 - Reduction.
Full Answer
B.$10,000✓ Correct
B
IRC §469(i). Excess MAGI = $30,000. Reduction = $15,000. Allowable loss = $10,000. The remaining $20,000 loss is suspended.
Common mistakes
Forgetting the phase-out; phasing out 100% of excess.
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