Question

Michelle is an active participant in the rental condominium property she owns. During the year, the property generates a ($15,000) loss; however, Michelle has sufficient tax basis and at-risk amounts to absorb the loss. If Michelle has $115,000 of salary, $10,000 of long-term capital gains, $3,000 of dividends, and no additional sources of income or deductions, how much loss can Michelle deduct

Answer 1

Answer: $11000

Step-by-step explanation:

The total income earned by Mitchell will be the addition of the salary, long term capital gain and dividend. This will be:

= $115,000 + $10,000 + $3,000

= $128,000

The exception amount of $25000 can be gotten.

Modified adjusted gross income = $100,000

Phased out amount = ($128000 - $100000) × 50%

= $28000 × 0.5

= $14000

Mitchell's loss = $25000 - $14000 = $11000