Question

Alexis, a single taxpayer, is an active participant in the rental of a property. In 2019, the property generated a $15,000 loss. Assume Alexis has sufficient tax basis and at-risk amounts to absorb the loss. If Alexis has AGI of $130,000 before considering the loss, how much loss can she deduct?

$0

$5,000

$10,000

$15,000

Answer 1

As per the provison of the act when a taxpayer has active participation in a property in following way loss may be deducted:-

"When the Taxpayer’s modified adjusted gross income is $100,000 or less ($50,000 or less if Married Filing Separately), the loss is deductible up to a maximum special allowance of $25,000.

If the Taxpayer’s modified adjusted gross income is more than $100,000 ($50,000 if Married Filing Separately) but less than $150,000 ($75,000 if Married Filing Separately), the special allowance is limited to 50% of the difference between $150,000 ($75,000 if Married Filing Separately) and the Taxpayer’s modified adjusted gross income"

Since in the current scenario Alexis AGI is $130000 i.e. comes between $100000 and $150000 the loss deductible will be :-

:- 50% of ( $150000- AGI )

= 50% Of($150000 - $13000)

= $10000