Real Estate Activities (LO. 7)

Carlos is a 25% owner of CEBJ Builders, a company that specializes in residential construction. The other 75% of CEBJ is owned by his three brothers. During the year, Carlos spends 1,800 hours managing the operations of CEBJ. He also is the 100% owner of four rental properties and spends 125 hours a year maintaining the properties, more than any other individual. During the current year, the four properties generate a loss of $18,500. His adjusted gross income before considering the rental loss is $118,000.

a. Carlos can deduct $_____ of the loss in the current year.

b. Assume that Carlos's ownership interest in CEBJ is 4%. The amount of the loss he can deduct is $______ .

c. Assume that Carlos spends only 600 hours managing CEBJ Builders and 1,200 hours managing a microbrewery he acquired earlier in the year. The amount of the loss he can deduct is $_______ .

d. Assume that Carlos hires his brother-in-law to help him manage the properties. Carlos spends 125 hours and his brother-in-law spends 225 hours managing the rental properties. The amount of the loss he can deduct is $_________ .