Homework Answers
Answer -
Step - ( 1 ) - Information Given -
Anwar owns a rental home and is involved in maintaining it and approving renters.
During the year he has a net loss of $8800 from renting the home. His other sources of income during the year are a salary of $120750 and $20700 of long-term capital gains.
.
Step - ( 2 ) - Relevant notes for Rental real estate loss allowance -
Note - (1) - An individual may deduct up to $25000 of real estate loss per year if there adjusted gross income is $100000 or less and a partial deduction if their adjusted gross income is over $100000 but less than $150000.
Note - (2) - Individuals whose adjusted gross income exceeds $150000 are not eligible for this deduction.
Note - (3) - In order to qualify for the deduction, property owners should actively participate in managing the property.
.
Step - ( 3 ) - Calculation of Deductible amount of Anwar's rental loss -
Anwar is actively participate in managing the property and his Adjusted gross income is ( $120750 + $20700 ) = $141450
So, Deductible amount of Anwar's rental loss =
= [( $150000 - $141450 ) / ( $150000 - $100000 )] * $25000
= $4275
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