Question

In: Accounting

Ivan and Olga own a duplex. They collect the rents and make repairs to the property...

Ivan and Olga own a duplex. They collect the rents and make repairs to the property when necessary. That is, they are active participants in the rental property. During the current year, the duplex has gross rents of $16,000 and total allowable deductions of $31,000.

Refer to Figure 7-3 to answer the following questions.

Complete the statements below which outline their allowable loss based on the adjusted gross income provided in each of the following.

a. $87,000: Ivan and Olga are allowed to deduct $_______ of rental real estate loss.

b. $122,000: Ivan and Olga must adjust their loss when adjusted gross income exceeds $______. Their allowable loss is capped at $_________.

c. $155,000: Ivan and Olga's adjusted gross income exceeds the (active/material/real estate) cap of $_______

d. $139,000: Ivan and Olga must reduce their allowed loss . They have an allowable loss deduction of $.___________

Expert Solution

Hello, Friend...

hope you're also doing well.

I have tried to give best possible answer. If you have any doubts, please do mention in comment section. I'll try my best reslove ASAP.

Ans:

General Concept:

Individuals allowed upto $25,000 of losses from rental real estate business against portfolio income.
If the individuals gross total income exceeds $100,000 the same deduction reduced by $0.50 for every $1 in excess of $100,000.
The unadjusted amount of $25,000 limit, can be adjusted from next year's limit of $25,000.

a. Ivan and Olga are allowed to deduct $ 15,000 of rental real estate loss.

Working: Allowed deduction ($16,000-$31000) = $15,000.

b. Ivan and Olga must adjust their loss when adjusted gross income exceeds $ 100,000. Their allowable loss is capped at $ 14,000.

Working: $25,000 - (($ 122,000 - $ 100,000) x $ 0.50) i.e. $ 11,000 = $ 14,000.

c. Ivan and Olga's adjusted gross income exceeds the (active/material/real estate) cap of $ 0.

Working: $25,000 - (($ 155,000 - $ 100,000) x $ 0.50) i.e. $ 27,500 = $ 0.

d. Ivan and Olga must reduce their allowed loss . They have an allowable loss deduction of $ 5,500.

Working: $25,000 - (($ 139,000 - $ 100,000) x $ 0.50) i.e. $ 19,500 = $ 5,500.

Thanks Dear, Have a Wonderful Day... Stay healthy and keep social distancing.

ekkarill92 answered 1 year ago

Bob owns a duplex used as rental property. The duplex has a basis of $86,000 and...

Bob owns a duplex used as rental property. The duplex has a basis of $86,000 and a fair market value of $300,000. Bob transfers the duplex to his brother, Carl, in exchange for a triplex that Carl owns. The triplex has a basis of $279,000 and a fair market value of $300,000. Two months after the exchange, but in the same taxable year as the exchange with his brother, Carl sells the duplex to his business associate for $312,000. a....

1. Bob owned a duplex used as rental property. The duplex had an adjusted basis to...

1. Bob owned a duplex used as rental property. The duplex had an adjusted basis to Bob of $86,000 and a fair market value of $300,000. Bob transferred the duplex to his brother, Carl, in exchange for a triplex that Carl owned. The triplex had an adjusted basis to Carl of $279,000 and a fair market value of $300,000. Two months after the exchange, Carl sold the duplex to his business associate to whom he was not related for $312,000....

the cost of repairs to business property: a. must be capitalized if the repairs maintain the...

the cost of repairs to business property: a. must be capitalized if the repairs maintain the working condition of the property b. must be capitalized if the repairs substantially improve the asset c. must be expensed if the repairs materially prolong the life of the asset d. must be expensed in the year paid

Kelvin owns and lives in a duplex. He rents the other unit for $680 per month....

Kelvin owns and lives in a duplex. He rents the other unit for $680 per month. He incurs the following expenses during the current year for the entire property: Mortgage interest $ 7,150 Property taxes 1,720 Utilities 1,180 Fixed light fixture in rental unit 65 Fixed dishwasher in personal unit 180 Painted entire exterior 890 Insurance 1,300 Depreciation (entire structure) 5,800 Required: How are the above income and expenses reported on Kelvin’s tax return? (Enter Schedule E expense as a...

Monica rents a one-bedroom apartment. Because she does not own the property, does this mean she...

Monica rents a one-bedroom apartment. Because she does not own the property, does this mean she is not liable for any injuries that might occur in her home? Give an example of a situation where she would be responsible. How should she cover her potential liability as a renter? (home insurance for renters, HO-4)

15. You have purchased a duplex property for $275,000. The property’s assessed value was $200,000,...

15. You have purchased a duplex property for $275,000. The property’s assessed value was $200,000, of which $140,000 is for improvements and $60,000 is for land. The property was purchased on the first day of the tax year. What is the cost recovery for the year of acquisition? a. 4,000 b. 6,709 c. 5,156 d. 275,000 16. Cost Recovery Deduction depends on the useful economic life of an asset defined by the IRS. The class life of residential real...

Assume you own and occupy a duplex. You live in one unit and rent out the...

Assume you own and occupy a duplex. You live in one unit and rent out the other unit. You notice your tenant has a clogged drain on an almost monthly basis. You are responsible for paying for the plumber or for unclogging the drain yourself. You suspect your tenant is pouring bacon grease down the drain because you often experience the smell of frying bacon coming from her apartment. Despite your questioning, your tenant denies putting bacon grease down the...

Jenny bought a rental property for $900,000 and leased it for 3 years. Rents will be...

Jenny bought a rental property for $900,000 and leased it for 3 years. Rents will be paid at the beginning of each month and the residual value after 3 years will be $700,000. To earn 8% rate of return per year on this lease, how much rent/month should be charged? Instructions: use the Compound interest tables to solve -Future value of 1 (future value of a single sum) -Present value of 1 (present value of a single sum) -Future value...

You own a small business that repairs furnaces and air conditioners. The market is competitive so...

You own a small business that repairs furnaces and air conditioners. The market is competitive so you must charge the same price as all other firms - $50 per house visit. You can take on as many customers as you would like when you charge this price. Your daily production function is given below, where K = the number of vans you have and L = the number of employees you have each day: ?? = ??(??, ??) = 10??2??1/2...

A specialist electronics company carries out its own repairs. The manager of the repair center is...

A specialist electronics company carries out its own repairs. The manager of the repair center is becoming concerned that the cost of repairs is continually increasing. She has observed the operations of the repair center and collected data relating to the number of items being repaired each day, and also the cost of repairing these items over a 50-day period. This information is presented in the following tables: Repairs per day Probability 1 0.08 2 0.22 3 0.38 4 0.26...