Lindsey owns and actively manages an apartment complex. This year, the complex generated a $40,300 net loss. If Lindsey's AGI before considering this loss is $118,200 and she owns no other passive activities, how much of the loss is deductible this year?

Question

Quizplus · Accepted Answer

The IRS allows a special $25,000 allowance for losses from real estate activities if you actively participate and your adjusted gross income (AGI) is $100,000 or less, phasing out completely at $150,000. Since Lindsey's AGI is $118,200, she can deduct a portion of her loss. The phase-out starts at $100,000, so with an AGI of $118,200, she is $18,200 into the phase-out range. The phase-out reduces the $25,000 allowance by $0.50 for every dollar over $100,000. Therefore, Lindsey can deduct $25,000 - ($18,200 * $0.50) = $25,000 - $9,100 = $15,900. Since none of the provided choices matches this calculation, the correct answer is that none of these choices are correct.

Lindsey Owns and Actively Manages an Apartment Complex