[VD]

Hi,

In Becker’s book there was an example that states Rent Expense is included in Ordinary Business Income calculation and not Separately Stated Items.

Rental Income/Loss is a Separately Stated Items right? Shouldn’t Rent Expense be part of the Separately Stated Items calculation?

If anyone knows the reason why, please help explain to me.

Thank you!

[DS]

Rental income is separately stated since it must be accounted for under the passive income rules by the pass-through owner. Rental expense is a deductible business expense with no limitation so it does not need to be separated out of the business's ordinary income.

[ellabella]

I agree; I think the confusion lies in that in one instance, the business is paying rent, and in the other instance, they have passive income/loss from a property they own. I am currently studying for the exam using UWorld Roger, and can see this being on the exam as a “thought-type” question designed to befuddle one a bit.

[Author]

Replies