Week 3 Homework
Please provide your answer to each question in the space provided below.
When finished, submit to the DropBox.
1. In your "own" words, please describe what a "Suspended Loss" is, how it is generated and when it is becomes deductible. (5 pts)
A capital loss that cannot be realized in a given tax year due to passive activity limitations. These losses are therefore "suspended" until they can be netted against passive income in a future tax year. Suspended losses are incurred as a result of passive activities, and can only be carried forward.
2. Please describe "Active Participation" as it relates to a taxpayer's involvement in an investment in Real Estate. (5 pts).
Active participation is the involvement, either by a single person or a group of people, in their individual power or other deeds, with the resolution of using impact. Active participation can be exposed if you brand bona fide organization judgments such as approving new tenants, determining payment terms, approving expenditures, and like deeds.
3. Macy had a lot of medical expenses this year that were not covered by her insurance (either due to a deductible, co-insurance, or co-pay). Her un-reimbursed qualifying medical expenses total $8,356 and her AGI for 2013 is $45,000. Assuming she will itemize on her 2013 tax return, how much of her medical expenses will she be able to deduct? (5 pts)
8356 – 4,500 = $3,856 His medical deductible expenses.
3. Heather & Terry have a mortgage on their primary residence of $750,000 and a mortgage on their vacation home of $410,000. In 2013, they incurred $46,400 of mortgage interest expense. How much, if any, of that interest is deductible on Schedule A? (5 pts)
Since your loan amount exceeds the $1 million limit for home acquisition debt, your mortgage deduction is limited.
he will deduct only...