[Anonymous]

I have a question on one of Becker’s Sims.

Essentially the problem says the taxpayer has:

$5000 income from a real estate rental

$5000 share of income from an S-Corp

$3,000 share of Sec 179 from the S-Corp

$6,000 passive activity loss from an LLP, which Becker says is limited to $5,000.

So when calculating the total income from rental real estate, royalties Becker comes up with $4,000.

Why is the passive activity loss from the LLP limited to $5,000? Shouldn’t the loss be offset with the rental income?

[Anonymous]

limited to 5000 because the rental income is 5000. I might be confused about what you are asking

rental income 5000

passive activity losses allowed = 5000

what am i missing?

[Anonymous]

Yes, but shouldn't it be able to offset with the passive income from the S-Corp as well?

[Anonymous]

does the problem state that the s corp income is passive?

If not, I think it is just income (schedule E)

[Anonymous]

According to this post (which is talking about the same simulation I referred to) S-Corp Income is always Passive:

https://www.another71.com/cpa-exam-forum/topic/becker-final-exam-2-simulation-5-item-4-help

FYI: Wonderland Resorts is the S-Corp and Technology Plus is the LLP.

I still do not understand why the passive loss is limited to $5,000? Shouldn't the rental income or the S-Corp income be able to offset the passive LLP income?

[Anonymous]

does it say if he actively participates in the s corp?

[Anonymous]

This is from IRS:

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Passive-Activity-Loss-ATG-Chapter-3-Passive-Income

Passive income is most commonly reflected on Schedule E as a net rental income or as income from a partnership or S Corporation in which the taxpayer does not materially participate.

[Anonymous]

It says he owns a 50% interest in the S-Corp from which he was paid a salary and received distributions.

So i'm guessing the fact that he was paid a salary makes the investment active?

But then here is Becker's solution:

Income from rental real estate, royalties and partnerships:

Net personal rental real estate $5,000

Technology Plus Inc. (S-Corp) 5,000

Sec. 179 Depreciation (3,000) [Offset to the $5,000 from Technology Plus]

Wonderland Resorts LLP (5,000) [$6,000 from calculation below – Passive Loss limited to $5,000]

Total rental real estate $2,000 Passive income from rental real estate

So why is the net result $2,000 from the rental activity?

[Anonymous]

Is it possible the answer should say the income is from the Tech Plus and not the rental

[Anonymous]

Ok, that's probably what they meant. Another Becker mistake *sigh

I've found a lot of Becker mistakes in the material just by comparing Becker to NINJA, and it turns out NINJA was right. I'll just go with this and focus on my weak areas since my test is two days away. Thanks for the input!

[Anonymous]

Did anyone figure this out? Why is the limit only $5K, when it looks like theses $10K of passive income?

[Anonymous]

Hi i'm stuck on this question too, Does anyone understand the explanantion for secion 179 depreciation{ Sec. 179 Depreciation (3,000) [Offset to the $5,000 from Technology Plus]? Why does Sec 179 needs to offset the $5000 from technology plus?

[Author]

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