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____ 17. Sim, a computer lab manager, earns a salary of $80,000 and receives $25

ID: 2580683 • Letter: #

Question

____   17.   Sim, a computer lab manager, earns a salary of $80,000 and receives $25,000 in dividends and interest during the year. In addition, he incurs a loss of $50,000 from an investment in a non-real estate passive activity and $13,000 in income from another passive activity. His at-risk amount in the activity at the beginning of the year is $55,000. What is Sim’s adjusted gross income for this year?

a.

$50,000.

b.

$85,000.

c.

$105,000.

d.

None of the above.

instructions : Choose the best multiple choice answer and explain why you chose the answer. MUST provide 2-3 sentence brief explanation and show all work. All sources must be noted.

a.

$50,000.

b.

$85,000.

c.

$105,000.

d.

None of the above.

Explanation / Answer

The adjusted gross income is comprised of earned income of the taxpayer during the tax period. The passive activity loss shall not be a part of it.

Adjusted gross income = Salary + Dividends and Interest

= $80000 + $25000

= $105000

Ans is c.