Question

Dana and Larry are married and live in Texas. Dana earns a salary of $45,000 and Larry has $25,000 of rental income from his separate property. If Dana and Larry file separate tax returns, what amount of income must Larry report? a. $22,500 O b. $47,500 c. $0 d. $25,000 e. None of these choices are correct.

Answer 1

D) $25,000

Step-by-step explanation:

Even though Dana and Larry are married, since they are filing separate tax returns, then all the income that Larry must declare are his $25,000 earned as rental income.

If they were filing together, then they would declare $70,000 as combined income (= $25,000 + $45,000).