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Practice CPA®CPA TCP Practice Exam 5Question 37

Medium1 markMultiple Choice

Area I: Individual Compliance and PlanningTCPIndividual TaxPassive Activity Losses

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?

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

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.

Question 36 All questions Question 38

Practice the full CPA TCP Practice Exam 5

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