Aretha and Betina own a 10-unit apartment complex. Aretha owns a 60% interest in the apartment complex, and Betina has a 40% interest. Aretha is an investment banker and spends 120 hours helping to manage the apartment complex. Betina is the co-owner of a real estate agency where she works 1,600 hours a year. She also spends 520 hours managing the apartment complex. During the current year, the apartment complex generates a loss of $24,000. Aretha’s adjusted gross income before considering the loss from the apartment complex is $175,000, and Betina’s is $162,000. How much of the loss can Aretha deduct? How much of the loss can Betina deduct?
a. Assume the same facts except that Aretha’s adjusted gross income before the rental loss is $145,000 and Betina’s is $140,000. How much of the loss can Aretha deduct? How much of the loss can Betina deduct?
b. Assume the same facts as in part a, except that the apartment complex qualifies under federal guidelines as low-income housing. How much of the loss can Aretha deduct? How much of the loss can Betina deduct?