Stan, a computer lab manager, earns a salary of $80,000 and receives $25,000 in dividends and interest during the year.In addition, he incurs a loss of $40,000 from an investment in a non-real estate passive activity.His at-risk amount in the activity at the beginning of the year is $55,000.What is Stan's adjusted gross income for this year?

Question

Quizplus · Accepted Answer

Adjusted gross income (AGI) is calculated as follows:

Salary + Interest and Dividend Income - Losses from Passive Activities = AGI

Substituting the given values in the above formula, we get:

$80,000 + $25,000 - $40,000 = $65,000

However, we need to account for the at-risk amount in the passive activity. Since the at-risk amount is $55,000, the most that Stan could lose from this activity is $55,000. As his loss is only $40,000, we need to add the remaining at-risk amount to his AGI as a positive amount.

Therefore, AGI = $80,000 + $25,000 - $40,000 + ($55,000 - $40,000) = $105,000.

Hence, the correct answer is C.

Stan, a Computer Lab Manager, Earns a Salary of $80,000