Reference no: EM132318516
Question
1) Stephen and Joy own a duplex in Newport Beach, CA. They live in one unit and rent the other to another couple. Their rental income for the year was $24,000. They incurred the following expenses for the entire duplex:
Insurance $8,000
Maintenance 800
Utilities 1,800
Depreciation 4,000
What amount of net income from the duplex should Stephen and Joy report for the current year?
A) $7,300
B) $9,400
C) $16,700
D) $24,000
2) A taxpayer's share of nonrecourse debt is considered an amount at-risk. (True or False)
a) True
b) False
3) Most real estate debt meets the requirements of qualified nonrecourse financing (True or False).
a) True
b) False
4) Libby owns and operates Mountain View Inn, a bed and breakfast. Libby's inn is not considered a passive activity. (True or False)
a) True
b) False
5) A loss must first be allowed under the passive activity loss rules and then must pass through the at-risk rules in order to ultimately be deducted on the tax return. (True or False)
a) True
b) False
6) How much, in rental losses, can an individual earning a salary of $125,000 per year offset against salary if he or she owns at least 10% of a rental activity and actively participates in the rental activity?
A) $0.
B) $2,500.
C) $12,500.
D) $25,000.
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