Question

Which of the following types of income is passive income?
a. Net rental income from real estate limited partnership investments b. Dividends from domestic corporations
c. Wages
d. Interest income from certificates of deposit
e. None of the above

Which of the following is classified as active income?

a. Self-employment income from a small business
b. Interest income
c. Limited partnership income

d. Dividend income from a mutual fund

e. a. and d.

Nancy has active modified adjusted gross income before passive losses of $75,000. She has a loss of $5,000 on a rental property she actively manages. How much of the loss is she allowed to take against the $75,000 of other income?
a. None

b. $2,500

c. $5,000

d. $10,000

Ned has active modified adjusted gross income before passive losses of $250,000. He has a loss of $15,000 on rental property he actively manages. How much of the loss is he allowed to take against the $250,000 of other income?
a. $15,000

b. $10,000

c. $5,000

d. None

Norm is a real estate professional with a real estate trade or business as defined in the tax law. He has $80,000 of business income and $40,000 of losses from actively managed real estate rentals. How much of the $40,000 in losses is he allowed to claim on his tax return?

a. $40,000

b. $25,000

c. $20,000

d. None

Bonita earns $31,000 from her job, and she has $1,000 of interest income. She has itemized deductions of $35,000. There are no casualty or theft losses in the itemized deductions. What is Bonita’s net operating loss for the current year?
a. $0

b. $1,000

c. $3,000

d. $4,000

e. Some other amount

Jim has a net operating loss in 2019. If he does not make any special elections, what is the first year to which Jim carries the net operating loss?
a. 2015
b. 2016

c. 2017

d. 2018

e. 2020

Answer 1

Answer 1.

Correct option is a .

Net rental income from real estate limited partnership investments

As it shows the correct form passive income of limited participation.

Answer 2.

Correct option is a .

Because all other options are passive income only.

Answer 3.

Correct option is c . $5000

Because it can be offset as Nancy actively manages it.  

Answer 4.

Correct option is d .

None . Because his AGI crosses the threshold of 100,000 for deduction

Answer 5.

Correct option is a. $40000

Because it can be offset fully as it is an active loss.  

Answer 6.

Correct option is a. $0

Because there is no operating loss

Answer 7.

Correct option is e. 2020

Because the operating loss is carried to immediate next year.