[Oimie]

https://oi57.tinypic.com/2jb5i0z.jpg

Whoever wrote this explanation must have been high. I am 99.999999999% sure it is wrong in all kinds of ways.

First, passive activity losses can only be netted against passive activity gains. The left over 20,000 passive activity loss is carried forward, not deducted from gross income.

Second we use AGI to determine rental activity loss deduction limit, not modified AGI.

Third let’s say even if we use the 140,000 to calculate the rental activity loss deduction limit, it would be 25,000 – 20,000 AND NOT 35,000 – 20,000.

And the question says the MAGI is 165,000 meanwhile the explanation says the MAGI is 160,000. Not that I know what in the world this MAGI is for.

But anyway, the explanation for this MCQ is wrong on so many levels. The answer is simply 0. The 25,000 rental activity loss deduction limit completely phases out when AGI hits 150,000.

This is question #1159

FAR 85 June 2015
AUD 80 Nov 2015
REG 83 Nov 2015
BEC 79 Feb 2016