Question

James is the sole owner of several parcels of rental real estate, and he actively participates in managing the properties. His total net loss from these activities in 2014 was $35,000 and his adjusted gross income for 2014 was $110,000. How much, if any, is the loss carryover to future years?a.   There is no carryover, since the full loss is allowable for 2014. b.         None of the disallowed loss may be carried over. c.   $5,000. d. $10,000. e. $15,000.

My answer is(a)There is no carryover, since the full loss is allowable for 2014.Under IRS Code Section 469(a), passive activity losses are limited to passive activity income. Can you tell me f this is correct?

Answer 1

Ans is e $15,000

Explanation: It shall come into u/s 469(i) where rental real estate loss upto $25,000 is allowed for a person who actively participates in management of properties and this $25,000 limit is reduced by phase out if MAGI of person exceeds $100,000 till $150,000 MFJ. Since his AGI is $110,000 so his deduction amount will be reduced by 50% of (110000-100000) i.e. 5000 and effective deduction for current year will only be $20,000(25000-5000) and remaining $15000 loss will be carried forward.