Brad owns a small townhouse complex that generates a loss during the year. Complete each item below regarding (a) the circumstances where Brad can deduct a loss from the rental activity and (b) any limitations that would apply. a. Brad might be allowed to deduct up to $ of the passive activity losses from the townhouse complex against income. To qualify for the deduction under the real estate rental exception, Brad must actively participate in the activity and own or more of all interests in the activity for the entire taxable year. Or, Brad may be allowed to deduct the loss if he works more than hours as a material participant in connection with the townhouse complex and more than of the personal services that he renders are performed in real property businesses where he materially participates. If Brad does not satisfy the the requirements for these two exceptions, he must continue to treat income and losses from real estate rental activities as activity income and losses. b. If Brad, who files single, qualifies for the real estate rental exception, the maximum deduction is reduced if his AGI exceeds the threshold. The reduction is equal to of AGI in excess of $ The deduction will be phased out completely if AGI reaches $

Blue computers, a major pc manufacturer in the united states, currently has plants in kentucky and pennsylvania. the kentucky plant has a capacity of 1 million units a year and the pennsylvania plant has a capacity of 1.5 million units a year. the firm divides the united states into five markets: northeast, southeast, midwest, south, and west. each pc sells for $1,000. the firm anticipates a 50 perc~nt growth in demand (in each region) this year (after which demand will stabilize) and wants to build a plant with a capacity of 1.5 million units per year to accommodate the growth. potential sites being considered are in north carolina and california. currently the firm pays federal, state, and local taxes on the income from each plant. federal taxes are 20 percent of income, and all state and local taxes are 7 percent of income in each state. north carolina has offered to reduce taxes for the next 10 years from 7 percent to 2 percent. blue computers would like to take the tax break into consideration when planning its network. consider income over the next 10 years in your analysis. assume that all costs remain unchanged over the 10 years. use a discount factor of 0.1 for your analysis. annual fixed costs, production and shipping costs per unit, and current regional demand (before the 50 percent growth) are shown in table 5-13. (a) if blue computers sets an objective of minimizing total fixed and variable costs, where should they build the new plant? how should the network be structured? (b) if blue computers sets an objective of maximizing after-tax profits, where should they build the new plant? how should the network be structured? variable production and shipping cost ($/unit) annual fixed cost northeast southeast midwest south west (million$) kentucky 185 180 175 175 200 150 pennsylvania 170 190 180 200 220 200 n. carolina 180 180 185 185 215 150 california 220 220 195 195 175 150 demand ('000 units/month) 700 400 400 300 600