Question

2. Susan is the owner of a 35-unit apartment complex. She spends 950 hours a year managing the property. In addition, she works part-time for a mortgage company. She spends 1,150 hours a year as a bookkeeper at the mortgage company. The apartment complex generated a loss of $32,000, and Susan's adjusted gross income for the current year, before considering the apartment complex, is $48,000. How much of the loss can Susan deduct?

a. $- 0 - b. $14,476   c. $16,727 d. $25,000   e. $32,000

3. Karl has the following income (loss) during the current year: Net business income $45,500 Dividends and interest 12,000 Actively managed rental property (34,000) ​ What is Karl's adjusted gross income for this year?

a. $23,500   b. $31,400 c. $32,500   d. $45,500 e. $57,500

4. Ricardo owns interests in 3 passive activities: A, B, and C. During the current year, activity A realizes income of $8,000 while activities B and C realize losses of $16,000 and $24,000, respectively. Determine the amount of suspended loss attributable to activity C.

a. $- 0 -   b. $ 8,000   c. $12,800 d. $19,200 e. $24,000

5. "Active participation" and "real estate professional" are both exceptions to the general rule for passive activity losses with rental real estate.

I. One of the tests that an individual must meet to qualify as a real estate professional is that the taxpayer spends more than 50% of his/her time in real property trades or businesses.

II. A taxpayer with an AGI of $190,000 qualifying under the real estate professional exception may deduct an unlimited amount of rental real estate losses.

​ a. Only statement I is correct. b. Only statement II is correct.   c. Both statements are correct. d. Neither statement is correct.

6. Melinda and Riley are married taxpayers. During the year, they completed a single capital asset sale in which a loss of $120,000 is realized on the sale ($15,000 amount realized, less $135,000 adjusted basis) of qualified small business stock. How much of the loss can the taxpayers deduct?

a. $3,000 b. $53,000 c. $100,000 d. $103,000 e. $120,000

Answer 1

2. Since Susan has devoted more than 750 hours during the tax year in real estate the loss generated from apartment complex can be off set with adjusted gross income of the year.Hence Susan is eligible to claim full $ 32,000 loss from her income of $ 48,000.

3.Since in the sum no detail on Karl's rental income (loss) is provided that whether it was Active income or passive income.We are assuming that the rental loss is active and hence has been off-set fully with Net Business income.

Particulars	Amt in dollars
Net business income of Karl	45,500
Loss from Rental of property	-          34,000
Gross income	11,500
Income earned from Dividents and interest	12,000
Adjusted gross income of Karl	23,500

4.Since the income and losses generated in game A,B & C are from passive activities the loss can be off set with the income.Loss generated from Activity B & C in total is (40,000) which is over and above income generated from Activity A 8,000. Income generated from Activity A is off set with loss of Activity B, entire loss of Activity C ( $ 24,000) is a suspended loss.

5.Answer is option d. as statement 1. is incomplete, it does not mention about 750 hours of service during the tax year in real estate business.Statement II is incorrect as a real estate professional may deduct an unlimited amount of rental real estate losses but to restricted to AGI of $ 190,000.However it cannot exceed that.