ExpertMedium1 markMultiple Choice
CPA · Question 64 · Area I: Individual Compliance and Planning
A taxpayer has a $20,000 loss from a rental activity (active participation). AGI is $140,000. What is the deductible loss?
A taxpayer has a $20,000 loss from a rental activity (active participation). AGI is $140,000. What is the deductible loss?
Answer options:
A.
$20,000
B.
$5,000
C.
$0
D.
$10,000
How to approach this question
1. Excess AGI = $40k. 2. Reduction = $20k. 3. Allowance = $25k - $20k = $5k.
Full Answer
B.$5,000✓ Correct
IRC §469(i). $25,000 allowance reduced by 50% of AGI over $100,000. Reduction = $20,000. Allowed = $5,000.
Common mistakes
Deducting the full $20k loss.
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