Question

Problem 11-58 (LO. 3, 8)

Mandy, who has AGI of $80,000 before considering rental activities, is active in three separate real estate rental activities and is in the 22% tax bracket. She has $12,000 of losses from Activity A, $18,000 of losses from Activity B, and income of $10,000 from Activity C. She also has $2,100 of tax credits from Activity A.

Calculate her deductions and credits allowed and the suspended losses and credits. If an amount is zero, enter "0".

a. Mandy's deductions (her utilized loss) total $____ .

b. Her suspended loss is $____ .

c. After deducting the loss, Mandy has available a deduction equivalent of $_____ .

d. Her utilized credit is $____ , and her suspended credit is $______

Answer 1

Real estate rental activities are usually characterised as passive activities.

In this case the activities carried by Mandy can be stated as passive activities, as the question doesn't describe her as a real estate professional.

Calculations :

Particulars		Amount
Passive (Loss) from rental activities :
Activity A	(12,000)
Activity B	(18,000)
Total Passive Loss		(30,000)
Passive Income against which Passive Loss can be offset (Income from Activity C)		10,000
Net loss		(20,000)
Since passive income is not sufficient to offset passive loss, the lower of the following amounts can be allowable as deduction against income :
a. Net Loss		20,000
b. Maximum special allowance allowed before phaseout		25,000
c. Phaseout allowance post MAGI more than $100,000		-
Allowable Deduction to Mandy ( a. is lower)		20,000

a. Mandy's deduction (utilized loss) - $20,000 (as entire loss is utilized)

b. Suspended loss - $ 0 (as entire loss has been utilized)

c. After deducting loss, Mandy has available a deduction equivalent of $5,000 (25000 - 20000)

d. Utilized Credits - $1,100 (5000 (remaining deduction value) * 22%)

Suspended Credit - $ 1000 (2100-1100)