Passive Losses. In 2010, Julie, a single individual, reported the following item
ID: 2665236 • Letter: P
Question
Passive Losses. In 2010, Julie, a single individual, reported the following items of incomeand deduction:
Salary $166,000
Interest income 14,000
Long-term capital gain from sales of stock 22,000
Short-term capital losses from sales of stock (17,000)
Loss from a passive rental real estate activity (20,000)
Interest expense on loan to purchase stock (21,000)
Qualified residence interest on residence (12,000)
Charitable contributions ( 8,000)
Property taxes on residence ( 5,000)
Tax return preparation fees ( 2,500)
Unreimbursed employee business expenses ( 2,000)
Julie owns 100% and is an active participant in the rental real estate activity. What is
Julie’s taxable income in 2010?
Explanation / Answer
Deduct all expenses from the income you get an amount if the amount is positive it means having profits so on that tax is imposed if amount is negative it means loss so no tax is imposed it’s an simple concept
So here
Salary $166,000
Interest income 14,000
Long-term capital gain from sales of stock 22,000
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$130,000
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Short-term capital losses from sales of stock (17,000)
Loss from a passive rental real estate activity (20,000)
Interest expense on loan to purchase stock (21,000)
Qualified residence interest on residence (12,000)
Charitable contributions ( 8,000)
Property taxes on residence ( 5,000)
Tax return preparation fees ( 2,500)
Unreimbursed employee business expenses ( 2,000)
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$87,500
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So Taxable amount is $130,000 - $87,500 = $42,500