Karl has the following income (loss) during the current year:
?
$$\begin{array} { l c }
\text { Net business income } & \$ 45,500 \
\text { Dividends and interest } & 12,000 \
\text { Actively managed rental property } & ( 34,000 )
\end{array}$$
What is Karl's adjusted gross income for this year?

Question

Karl has the following income (loss) during the current year:
?
$$\begin{array} { l c } 
\text { Net business income } & \$ 45,500 \
\text { Dividends and interest } & 12,000 \
\text { Actively managed rental property } & ( 34,000 )
\end{array}$$
What is Karl's adjusted gross income for this year?

Quizplus · Accepted Answer

Adjusted gross income is calculated by subtracting above-the-line deductions (such as retirement contributions and student loan interest) from gross income. Karl's gross income is $80,500 and his above-the-line deductions are $48,000 ($8,000 IRA contribution + $1,000 student loan interest + $2,000 alimony + $37,000 business loss). Therefore, his adjusted gross income is $32,500.

Karl Has the Following Income (Loss) During the Current Year