Mr and Mrs Nelson operate a small business as a sole proprietorship. This year, they have the following tax information.
Net profit from sole proprietorship $\quad$$\quad$$\quad$$\quad$$ 50,000
Deduction for SE tax $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\quad$ $ 3,533
Dividends $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\quad$ $ 900
Net income from rental property $\quad$$\quad$$\quad$$\quad$$\quad$ $ 2,780
Loss from limited partnership $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$ (6,000 )
Compute Mr and Mrs Nelson's AGI.

Question

Mr and Mrs Nelson operate a small business as a sole proprietorship. This year, they have the following tax information.
Net profit from sole proprietorship $\quad$$\quad$$\quad$$\quad$$ 50,000
Deduction for SE tax $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\quad$  $ 3,533
Dividends $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\quad$ $ 900
Net income from rental property $\quad$$\quad$$\quad$$\quad$$\quad$ $ 2,780
Loss from limited partnership $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$  (6,000 )
Compute Mr and Mrs Nelson's AGI.

Quizplus · Accepted Answer

The loss from the partnership is deductible to the extent of the rental income. The $3,220 excess loss is a nondeductible passive activity loss. AGI = $50,000 net profit -$3,533 (SE tax deduction) + $900 dividends.

Mr and Mrs Nelson Operate a Small Business as a Sole