[Shaun425]

Hello, I have a couple questions:

Are real estate taxes itemized deductions or above the line deductions? In the Becker book they are itemized (under state, local, and foreign taxes), but on the becker mock exam, they are above the line deductions.

In calculating DNI, what is the deal with tax-exempt interest? Is it added to DNI or excluded?

Thanks!

[DeterminedDaph]

mortgage type real estate taxes are itemized for sure. the above the line deductions you may have seen on your mock exam are probably real estate losses??? those are deductible against active income (like w2 income) max $25k, and reduced by 50% of AGI over $100k (so at $150k it's phased out completely).

[DeterminedDaph]

Good luck tomorrow, get some rest!

[Shaun425]

Thank you!! Yeah, the solution referenced losses but the wording was just confusing!

[Shaun425]

Also, can anyone give any advice for solving a wash sale loss problem? i never can understand those. i get the whole 30 days before and after thing, but i cant calculate the loss.

[Anonymous]

@Shaun, wash sales are to keep you from deducting losses when there is no actual change of position (you bought the stock right back again). So assume this is your scenario:
Own 10 shares of ABC corp at $10 per share purchased on January 1, 2015.
On January 1, 2018, the price is $7 a share. I sell my 10 shares for $70. I turn around a re-purchase 10 shares on January 2nd for $7 again.
There has been no net change in position. I am not allowed to take the capital loss of $30 in 2018. But I can add it back into my basis ($70+$30). Thus when I do sell my position (without repurchasing), I am allowed to recognize this loss.

[Joe Payne]

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[Author]

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