Question

Molly owns a rental real estate property that incurred a loss during the year of $40,000. Molly is not a real property trade or business professional. She provides all of the services including approving new tenants, arranging for all maintenance and paying utilities and real estate taxes. Molly's AGI not counting the rental loss is $110,000. How much rental loss can Molly claim?

$ 70,000.

$ 85,000.

$ 90,000.

$ 110,000.

Answer 1

As per the standards, rental loss can be offset maximum upto $25,000 if you income is less than $100,000. If your income is more than 100,000, then upto $150,000 the maximum deduction phases out resulting in no deductions above $150,000.

Therefore for every $10,000 increment in income above $100,000 it will reduce $5,000 of deduction.

So as the income is $110,000 , the deduction will be reduced by $5,000 from the maximum limit.

Deduction that can be claimed

= 25,000 - 5,000

= $20,000

Therefore the net income after deduction will be

= 110,000 - 20,000

= $90,000

So the correct option is 3rd.

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