Bruce Owns a Small Apartment Building That Produces a $25,000

question 68

True/False

Bruce owns a small apartment building that produces a $25,000 loss during the year. His AGI before considering the rental loss is $85,000. Bruce must be an active participant with respect to the rental activity in order to deduct the $25,000 loss under the real estate rental exception.

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Definitions:

Depletion Expense

A depletion expense is an accounting approach to allocate the cost of naturally occurring resources, such as minerals, oil, or timber, over their productive life as they are consumed or sold.

Mineral Rights

Legal entitlements associated with the ownership or leasing of the mineral resources beneath a piece of land, including the rights to explore, extract, and sell those minerals.

Straight-Line Method

A method of calculating depreciation of an asset, where the asset's cost is evenly distributed over its useful life.

Journalize

The process of recording transactions in an accounting journal, documenting the financial effects of transactions and events.