Question

Kathy and Annise are a married couple who file jointly. In the current year, they have net ordinary income of $10,000 from a partnership interest in which they do not materially participate. They also have a net loss of $30,000 from a rent house in which they actively participate. Their adjusted gross income (AGI) exclusive of these investments is $120,000. What is their AGI after taking into account these investments

Answer 1

Answer:

$100,000

Explanation:

As Kathy and Annise are a married couple who file jointly, their revised AGI can be calculated by deducting a net loss from the adjusted gross income.

DATA

Current AGI = $120,000

Rental loss = $30,000

Partnership gain = $10,000

Revised AGI = Current AGI - Net loss

Revised AGI = 120,000 – 20,000(w)

Revised AGI = 100,000

Working

Net loss = Rental loss – partnership gain

Net loss = $30,000 - $10,000

Net loss = $20,000

NOTE: Kathy and Annise can deduct 20,000 loss against other income as they materially participate in rental activities.