Question

Judy, a single individual, reports the following items of income and loss: Salary $120,000 Loss from rental property (40,000) Judy owns 100% of the rental property and actively participates in the rental of the property. Calculate Judy's AGI (15).

Answer 1

Answer: Judy's AGI is $105,000

Step-by-step explanation:

Given that;

(income) Salary $120,000

Loss from rental property (40,000)

Now as per 2020 IRS TAX law; we know that;

maximum allowance for loss from rental property in case of active participants is twenty five thousand dollar ($25,000)

Also amount of Gross income in excess of one hundred thousand dollar ($100,000) up to one hundred and fifty thousand dollar ($150,000) is subject to fifty percent (50%) deduction from the loss from rental property

this twenty five thousand dollar ($25,000) is deductible if one has Gross Income of one hundred and fifty thousand dollar ($150,000)

now lets calculate Judy's AGI

AGI before deductions = $120,000

Real estate exception = [$25,000 - ($120,000 - 100,000)×50%]

= $25,000 - $2000×0.5

= ($25,000 - $10,000)

Real estate exception = $15,000

so

AGI = AGI before deductions - Real estate exception

AGI = $120,000 - $15,000

AGI = $105,000

therefore Judy's AGI is $105,000