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:

$$\begin{array} { l c }
\text { Sal aries } & \$ 80,000 \
\text { Dividends and interest } & 8,000 \
\text { Loss from limited partnership acquired in } 2009 & ( 4,000 )
\end{array}$$
What is Mary and Philip's adjusted gross income?
A)$59,000
B)$63,000
C)$84,000
D)$88,000
E)None of the above.

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:

$$\begin{array} { l c } 
\text { Sal aries } & \$ 80,000 \
\text { Dividends and interest } & 8,000 \
\text { Loss from limited partnership acquired in } 2009 & ( 4,000 )
\end{array}$$
What is Mary and Philip's adjusted gross income?
A)$59,000
B)$63,000
C)$84,000
D)$88,000
E)None of the above.

Quizplus · Accepted Answer

Mary and Philip's adjusted gross income is calculated as follows:

Salary: $50,000
Interest Income: $10,000
Rental Real Estate Loss: -$35,000

Adjusted Gross Income: $50,000 + $10,000 - $35,000 = $25,000
However, they actively manage the apartment building, so they can deduct up to $25,000 of the loss against their other income. Therefore, their adjusted gross income is:
$50,000 + $10,000 - $10,000 = $63,000.

The correct answer is B, $63,000.

Mary and Philip Purchased an Apartment Building in January 2011