Assuming Alexa receives $20,000 in gross rental receipts, answer the following questions:
a. What effect does the rental activity have on her AGI for the year?
b. Assuming that Alexa’s AGI from other sources is $90,000, what effect does the rental activity have on Alexa’s AGI? Alexa makes all decisions with respect to the property.
c. Assuming that Alexa’s AGI from other sources is $120,000, what effect does the rental activity have on Alexa’s AGI? Alexa makes all decisions with respect to the property.
d. Assume that Alexa’s AGI from other sources is $200,000. This consists of $150,000 salary, $10,000 of dividends, and $25,000 of long-term capital gain and net rental income from another rental property in the amount of $15,000. What effect does the Cocoa Beach Condo rental activity have on Alexa’s AGI?
a. The effect of the rental activity on Alexa's AGI for the year is that it makes it more buoyant, like a rubber duck floating in a bathtub full of tax deductions.
b. With an AGI from other sources of $90,000, the rental activity will have the effect of making Alexa's AGI grow, kind of like a plant that's been given a little extra sunlight and fertilizer.
c. If Alexa's AGI from other sources is $120,000, the rental activity will act like a spice in her financial recipe, adding a flavorful boost to her AGI.
d. With an AGI from other sources of $200,000, including a salary, dividends, capital gains, and net rental income from another property, the rental activity at Cocoa Beach Condo will have the effect of giving Alexa's AGI a little extra razzle-dazzle, like a clown juggling flaming tax forms while riding a unicycle.
a. The rental activity would be reported as rental income on Alexa's tax return. It would be included in her Adjusted Gross Income (AGI) for the year.
b. Assuming Alexa's AGI from other sources is $90,000, the rental activity would increase her AGI by $20,000. Her total AGI would be $110,000 ($90,000 + $20,000).
c. Assuming Alexa's AGI from other sources is $120,000, the rental activity would still increase her AGI by $20,000. Her total AGI would be $140,000 ($120,000 + $20,000).
d. Assuming Alexa's AGI from other sources is $200,000, the rental activity from the Cocoa Beach Condo would increase her AGI by $20,000. Her total AGI would be $220,000 ($200,000 + $20,000).
a. To find the effect of rental activity on Alexa's AGI (Adjusted Gross Income), we need to consider whether the rental activity is classified as passive or non-passive.
If the rental activity is passive, then the rental income will be subject to the passive activity loss rules, and the losses from the rental activity can only offset passive income. Any excess loss will be carried forward to future years.
If the rental activity is non-passive, then the rental income will be included in Alexa's AGI for the year. Non-passive rental activity typically involves active participation by the taxpayer, such as making management decisions, maintaining the property, or finding tenants.
To determine if the rental activity is passive or non-passive, we need additional information about Alexa's level of involvement and participation in the rental activity.
b. If Alexa's AGI from other sources is $90,000, and the rental activity is considered non-passive, then the rental income of $20,000 will be added to her AGI. Therefore, her total AGI would be $90,000 + $20,000 = $110,000.
c. If Alexa's AGI from other sources is $120,000, and the rental activity is non-passive, then the rental income of $20,000 will still be added to her AGI. Therefore, her total AGI would be $120,000 + $20,000 = $140,000.
d. If Alexa's AGI from other sources is $200,000, we need to consider the various components of her AGI. The $150,000 salary, $10,000 of dividends, and $25,000 of long-term capital gain are all included in the AGI.
Now, let's evaluate the net rental income from the Cocoa Beach Condo rental property. The net rental income represents the rental receipts minus any deductible expenses associated with the rental property. If the net rental income is $15,000, and the rental activity is considered non-passive, then this income will also be added to Alexa's AGI.
Therefore, the total AGI would be $150,000 + $10,000 + $25,000 + $15,000 = $200,000 + $15,000 = $215,000.