R1 M5 - Itemized Deduction

Question 1

Paul paid the real estate taxes on his rental apartment building. The real estate taxes are:

A.	A deduction from adjusted gross income, subject to a 10 percent AGI floor.

B.	Not deductible.

C.	A deduction to arrive at adjusted gross income.

D.	A deduction from adjusted gross income.

Answer 1

Choice “C” is correct. Rental property expenses are reported on Schedule E (for AGI), and, subject to the passive activity loss provisions, the net rental income appears on Page 1 of the Form 1040 in arriving at AGI.

Choice “A” is incorrect. Rental property expenses are not an itemized deduction subject to a 10 percent AGI floor.

Choice “B” is incorrect. See explanation for choice “C”.

Choice “D” is incorrect. Rental property expenses are not a deduction from adjusted gross income. They are taken into account in arriving at adjusted gross income.