Hi thank you for helping. The attachment is a hint provided to solve the problem. Assume that it the 2024 Olympic Games cant be held in Paris, France and that the 2024 Olympic Games will now be held in Los Angeles, California. Assume that the 2023 Federal Tax Laws regarding rental realty properties are the same in 2024.

During the 1984 Olympics Frank and Irma rented their home in Hollywood, California and enjoyed a three-week vacation at their condo in Malibu, California. By 2000, they had purchased an apartment building in Pomona, California for $4,500,000 (i.e., land - $500,000 & Building - $4,000,000). Due to global warming and the aging process, they knew summers would be very warm in Los Angeles, so they kept their condo in Malibu for personal use in July & August. They are in the 22% Federal Income Tax bracket.

Frank & Irma have the following sources of income before considering the apartment income:

Pensions $ 80,000

Dividend Income 30,000

Interest Income 15,000 Part 3

Frank and Irma purchased the 20-unit apartment building for $4,500,000 (i.e., $500,000 for the land and $4,000,000 for the building). The income and expenses from the apartment building are as follows:

Income (i.e., 20 units @ $1,500/month) $ 360,000

Expenses:

Depreciation ($4 million @ 2.56%) $ 102,000

Insurance 50,000

Interest Expense ($2 million @ 3%) 60,000

R & M 10,000

Real Estate Taxes 67,500

Utilities 75,000

Manager 12,000

Total

Net Income $

The apartment manager collects the rents each month, inspects the property on a regular basis and handles tenant complaints. The apartment manager talks to Frank and Irma regarding the tenant complaints and discusses the potential repairs and maintenance that is required. The manager then arranges for the services contracts with outside vendors. Frank & Irma make the monthly deposits of tenant rent checks at their local bank and pay for all apartment expenditures from an apartment checking account that they control.

Required:

1. Compute Frank & Irmas modified adjusted gross income.
2. Under the Passive Activity Loss rules, how much of this loss can Frank & Irma claim on their Federal Income Tax return?
3. What is their adjusted gross income after considering the Passive Activity Loss rules?

How much of the rental loss can be claimed by Frank \& Irma under the Passive Activity Loss rules? Frank \& Irma's rental loss deduction for the current tax year is limited by the Passive Activity Loss rules which provides (?$_______ This means that Frank \& Irma can deduct a Rental Loss of \$ Frank \& Irma's revised Adjusted Gross Income: Adjusted Gross Income What is active participation vs. material participation in a rental property? Active participation in a rental activity involves: Material participation in a rental property - Hint IRC 469 Regulation