Question

Walter, a single taxpayer, purchased a limited partnership interest in a tax shelter in 1993. He also acquired a rental house in 2019, which he actively manages. During 2019, Walter's share of the partnership's losses was $30,000, and his rental house generated $20,000 in losses. Walter's modified adjusted gross income before passive losses is $130,000.
A. Calculate the amount of Walter's allowable deduction for rental house activities for 2017.B. Calculate the amount of Walter's allowable deduction for the partnership losses for 2017.C. What may be done with the unused losses, if anything?
1. The unused losses may be carried.
2. tax years to reduce.
3. income in those years.

Answer 1

Answer:

A. $10,000

B. $0

C. The unused losses may be carried forward to future tax years to reduce passive income in those years.

Explanation:

A. Calculate the amount of Walter's allowable deduction for rental house activities for 2017.

Excess of Walter's modified adjusted gross income before passive losses over $100,000 = $130,00 - $100,000 = $30,000

Allowable deductions = $25,000 - ($30,000 * 50%) = $10,000.

It should be noted that 50 cents, used as 50% above, for each dollar the tax payers modified adjusted gross income exceeds $100,000 is deducted from$25,000 to arrive at allowable deductions. However, there will not be allowable deduction in the case that the modified adjusted gross income is greater $150,000.

B. Calculate the amount of Walter's allowable deduction for the partnership losses for 2017.

Walter is eligible for allowable deduction for the partnership losses for 2017. Therefore, Walter's allowable deduction for the partnership losses for 2017 is $0.

C. What may be done with the unused losses, if anything?

1. The unused losses may be carried forward to future

2. tax years to reduce passive

3. income in those years.

Therefore, this can be joined together as follows:

The unused losses may be carried forward to future tax years to reduce passive income in those years.