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In: Accounting

7 (A). Barett, an attorney, earns $125,000 from her law practice in the current year. In...

7 (A). Barett, an attorney, earns $125,000 from her law practice in the current year. In addition, she receives $50,000 in dividends and interest during the year. Further, she incurs a loss of $40,000 from an investment in a passive activity.

What is Barett’s AGI for the year after considering the passive investment?

7 (B). John is single and age 56, has AGI of $265,000, and incurs the following expenditures in 2018. Medical expenses (before 7.5%-of-AGI floor) $27,000 Interest on home mortgage 15,500 State income tax 7,500 State sales tax 4,500 Real estate tax 8,600 Charitable contribution 6,500

What is the amount of itemized deductions John may claim?

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Expert Solution

Solution:-

7(A):- Barett, an attorney, earns $125,000 from her law practice in the current year. In addition, she receives $50,000 in dividends and interest during the year. Further, she incurs a loss of $40,000 from an investment in a passive activity:-

Barett cannot deduct the passive loss against active or portfolio income. Therefore, her AGI after considering the passive investment is $175,000 ($125,000 active income + $50,000 portfolio income).

7 (B). John is single and age 56, has AGI of $265,000, and incurs the following expenditures in 2018. Medical expenses (before 7.5%-of-AGI floor) $27,000 Interest on home mortgage 15,500 State income tax 7,500 State sales tax 4,500 Real estate tax 8,600 Charitable contribution 6,500:-

George is subject to the overall limitation on certain itemized deductions because his AGI exceeds the $261,500 threshold for single filers. His itemized deductions in 2018 after application of the overall limitation are computed below:

ekkarill92 answered 2 years ago
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