Smith actively participates in the rental real estate


1. A review of Bradley's Year 2 records disclosed the following tax information.

Wages                                                              $18,000

Taxable interest and qualifying dividends             4,000

Schedule C trucking business net income             32,000

Rental (loss) from residential property                 (35,000)

Limited partnership (loss)                                   (5,000)

Bradley actively participated in the rental property and was a limited partner in the partnership. Bradley had sufficient amounts at risk for the rental property and the partnership. What is Bradley's Year 2 adjusted gross income?

2. Smith has an adjusted gross income (AGI) of $120,000 without taking into consideration $40,000 of losses from rental real estate activities. Smith actively participates in the rental real estate activities. What amount of the rental losses may Smith deduct in determining taxable income?

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