This is long but can anyone help me out with this question?
I'm confused about why the answer is B-$15,000
Isn't the $25,000 deduction from ordinary income for passive loss from real estate rental activity reduced by 50% of AGI over $100,000? Here in the explanation it says the TOTAL passive rental loss is reduced by this amount.
I was thinking the deductible amount would be $5,000 ($25,000 less 50% of AGI over $100,000)
Lane, a single taxpayer, received $160,000 in salary, $15,000 in income from an S corporation in which Lane does not materially participate, and a $35,000 passive loss from a real estate rental activity in which Lane materially participated. Lane's modified adjusted gross income was $165,000. What amount of the real estate rental activity loss was deductible?
Incorrect
A. $0
B. $15,000
C. $25,000
D. $35,000
Individuals may offset up to $25,000 ($50,000 if married filing jointly) of ordinary income with rental real estate activities. This exemption is reduced (but not below zero) by 50% of the amount by which the adjusted gross income of the taxpayer for the year exceeds $100,000.
-First, the passive activities were netted $15,000 from the S corporation – $35,000 from the rental = $(20,000).
-Second, the salary of $160,000 is decreased by the net $20,000 passive activity loss for a modified AGI before limitation of $140,000.
-Third, the amount of $140,000 that exceeds $100,000 is multiplied by 50%, equaling $20,000.
-Fourth, the rental loss of $35,000 is decreased by the $20,000 limitation, leaving an allowable deduction of $15,000.
FAR 75 (8/21/13)
AUD 72 (10/29/13) 74 (2/12/14) 84! (04/01/14)
BEC 75 (11/27/13)
REG 72 (05/29/14) 74 (07/10/14) 86 and DONE! (10/02/14)
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