Home ownership taxation problems (Coursework Sample)

Home ownership taxation problems
Name
Course
Instructor
Date
effect of rental activity on AGI
The AGI will reduce by $ 0,
The rental property is not Alexa’s primary residence and hence all the rental deductions are taken into account when calculating for the Adjusted Gross Income
effect of rental activity on AGI where $90,000 is from other sources
There is $ 8,900 reduction
Alexa is an active participant as she makes decisions with respect the property. Active participation occurs if Alexa makes bona fide and significant management decisions, and owns 10% or more of the rental property. Hence, Alexa is allowed to deduct $ 25,000 losses on rental property. The AGI from other sources is below the $ 100, 000 threshold, and Alexa is eligible to deduct $25,000 against personal income. Additionally, Alexa can deduct $ 8,900 against $ 90,000 as an ordinary deduction.
C. effect of rental activity on AGI, where decisions are made in respect to the rental property
There is $ 8,900 reduction of the AGI
Alexa wholly owns the property and is an active participant, being eligible to deduct $ 25,000 renal loss against other incomes. However, other sources of income are $ 120,000 which is above $ 100,000, and there is an exception to the case. AGI levels above $ 100,000 are phased through reducing 50 cents for a dollar. The phase out = ($120,000-$1000, 000)* $ 0.50= $ 10,000, while the exception amount is $15,000 being the difference between $ 25,000 and $10,000. The $ 8,900 rental loss is less than the $ 15,000 exception amount hence $ 8,900 shoul...