Passive Activities - 7

Question 1

The general rule for passive losses is that they are only deductible against passive income. What is the exception to this rule?

Answer 1

If there is a REAL ESTATE rental activity and that is what is creating the passive loss, then you can deduct the passive loss from your earned income because govt actually encourages you to invest in real estate.

Question 2

If there are losses from a Passive activity that cannot be deducted this year, what happens?

Answer 2

Losses from a Passive activity can be carried forward indefintely

Question 3

All passive activity gains and losses are netted to arrive at a single number. True / False

Answer 3

True.

Question 4

What is considered as Rental Income

Answer 4

Rental income is basically Rent revenues minus the direct expenses.

Question 5

If there is a depreciation of $10,000 on the property. But the tax payer lived in that house and only rented half of the property, can they deduct the whole $10,000 as rental expenses in Schedule E

Answer 5

No, they can only deduct half. Because half the property was rented out. Not only depreciation, all expenses on the rental property is prorated.

Question 6

Even though rental income is viewed as a passive activity, losses up to $________________ can be deducted against earned income if ______________________________ and does not have an adjusted gross income that is over ________________ per year

Answer 6

$25000 can be deducted

The owner actively participates in the activity

$150,000 **learn this **

Question 7

Loss for Rental Activity: Tax payer Actively participates, AGI not more than than $100,000 then max deduction is ____________

Answer 7

$25,000

Question 8

Loss for Rental Activity: Tax payer Actively participates, AGI between $100,000 and $150,000 then max deduction is ____________

Answer 8

AGI over $150,000 - No deduction
AGI under $100,000 - Full deduction of $25000
Between $100,000 and $150,000 - The $25000 is phased out . That is 50 cents on the dollar (pg. 85 - example)

Question 9

If a property is rented out for less than 15days of the year and not rented out again during the year, how is it treated?

Answer 9

No rental income is includable and expenses are not deductible.

The property taxes would not be deductible on Schedule E, but they are deductible in on Schedule A (when we get to itemized deductions)

Question 10

What is TCJA

Answer 10

Tax Cuts and Jobs Act