Question

Problem 11-58 (LO. 3, 8). Ida, who has AGI of $80,000 before considering rental activities, is active in three separate real estate rental activities and is in the 22% tax bracket. She has $12,000 of losses from Activity A, $18,000 of losses from Activity B, and income of $10,000 from Activity C. She also has $2,100 of tax credits from Activity A. Calculate her deductions and credits allowed and the suspended losses and credits. If an amount is zero, enter "O". a. Ida's deductions (her utilized loss) total $ b. Her suspended loss is $ c. After deducting the loss, Ida has available a deduction equivalent of $ 1,400 x , and her suspended credit is $ d. Her utilized credit is $ 700 X.

Answer 1

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Answers are highlighted in yellow: Solution: Answer: a) $ 20,000 Explanation: Passive loss is initially deducted from a passive income from other source. In this case, There is no other passive income to offset. The remaining amount can be offset per below rule. Rental house activity is a passive activity. Since, there is an active participation, therefore, following rule and deduction will be allowed: Actual passive loss (12000+18000) $ 30,000 Passive loss can be offset against other Passive income. $ 10,000 If Passive Income is not sufficent than Lower of Remainning Passive loss or Following: $ 20,000 Maximum allowance allowed before phaseout as per IRS $ 25,000 Phaseout Starts from MAGI $100000 $ - Allowable loss deduction against ordinary income for the year (net loss) $ 20,000 Answer: b) $0 (Because, a complete loss of $20,000 has been offset already). Answer: c) $5,000 (25000-20000) Answer: d) Her utilized credit is $ 1,100, and her suspended credit is (5000*22%) $ 1,000 (2100-1100)