Mary and Philip purchased an apartment building in January 2011,which they actively manage.During the current year,the apartment building generates a loss of $35,000.Their other income is as follows:

What is Mary and Philip's adjusted gross income?

Question

Mary and Philip purchased an apartment building in January 2011,which they actively manage.During the current year,the apartment building generates a loss of $35,000.Their other income is as follows:
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What is Mary and Philip's adjusted gross income?

Quizplus · Accepted Answer

To calculate Mary and Philip's adjusted gross income, we need to first calculate their total income from all sources:

Rental loss from the apartment building: -$35,000
Mary's W-2 wages: $40,000
Philip's net Schedule C income: $15,000
Interest income: $3,000
Qualified dividends: $2,000

Total income: -$35,000 + $40,000 + $15,000 + $3,000 + $2,000 = $25,000

Since their income is positive, they can use the rental loss to offset their other income, up to a maximum of $25,000. Therefore, their adjusted gross income is:

Adjusted gross income = Total income - Rental loss used = $25,000 - $25,000 = $0

However, if they cannot use the full $35,000 rental loss to offset their other income, the remaining loss can be carried forward to future years, subject to certain limitations.

Mary and Philip Purchased an Apartment Building in January 2011,which