Mary and Philip purchased an apartment building in January 2004,which they actively manage.During the current year,the apartment building generates a loss of $35,000.Their other income is as follows:
$\begin{array}{lr}
\text { Salaries } & \$ 80,000 \
\text { Dividends and interest } & 8,000 \
\text { Loss from limited partnership acquired in } 1999 & (4,000)
\end{array}$
What is Mary and Philip's adjusted gross income?

Question

Quizplus · Accepted Answer

Mary and Philip can deduct the $35,000 loss from the apartment building against their other income. Their adjusted gross income is calculated as follows: $80,000 (salaries) + $8,000 (dividends and interest) - $35,000 (apartment loss) - $4,000 (limited partnership loss) = $49,000. However, the passive activity loss rules limit the deduction of passive losses to $25,000, so the adjusted gross income is $80,000 + $8,000 - $25,000 = $63,000.

Mary and Philip Purchased an Apartment Building in January 2004,which