Alexa owns a condominium near Cocoa Beach in Florida. This year, she incurs the following expenses...

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Alexa owns a condominium near Cocoa Beach in Florida. This year, she incurs the following expenses in connection with her con

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Answer 1

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Answer #1

Answer -

AGI = $200000

Calculation:

Gross rental income		$20000
Expenses:
Insurance	$2000
Mortgage interest	$6500
Property taxes	$2000
Repairs and maintenance	$1400
Utilities	$2500
Depreciation	$14500
Less: Total expenses		($28900)
Balance-Net rental loss		($8900)

Explanation:

A rental is considered to be a passive activity. Consequently, losses from rental property are not allowed to offset other ordinary or investment type income.

Alexa will include $20000 of rental income in gross income. She will also get to deduct $20000 of expenses related to the rental property. The remaining $8900 of expenses (the rental loss) is not deductible this year.

Because, the rental activity is a passive activity and Alexa has no passive income from other sources.

Alexa's AGI is above the phase-out range ($100000 - $150000) so she is not allowed to deduct any of the loss under the rental real estate exception to the passive loss rules.

She may, carry the loss forward to future years in which she has passive income to offset.

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Answer 2

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